One stock that’s trading in the right direction today is prominent mega-cap biotech stock Biogen (NASDAQ:BIIB). Shares of BIIB stock have surged around 3.7% as of early afternoon trading on apparent hopes the company’s Alzheimer’s drug will be approved by the Food and Drug Administration (FDA).
The company’s lecanemab drug, which has been developed in coordination with Eisai (OTCMKTS:ESALY), is an antibody treatment aimed at treating Alzheimer’s. The drug works by targeting amyloid proteins, which many experts believe are the root cause of Alzheimer’s disease. Of course, a positive ruling in one fashion or another would be extremely bullish for BIIB stock.
Notably, today is decision day for this drug, prompting a flurry of bets on whether this drug will be approved or not. Let’s dive into what to make of this potential massive catalyst.
Could FDA Approval Take BIIB Stock on a Massive Run?
Analysts have chimed in with their view that approval may be more likely than not. Jeffries analysts reportedly believe the consensus view that this drug will be approved is reasonable, but the market has likely mostly priced this in. Wells Fargo analysts suggest the approval may be more difficult than initially expected, particularly with issues around the approval process of previous Alzheimer’s drug Aduhelm.
Accordingly, it’s unclear to me how the probabilities stack up right now. There’s clearly some uncertainty with this decision, and some likely near-term volatility for Biogen regardless of the result. Thus, this is a mega-cap stock that could see a massive move in either direction following this news. While the market appears to be pricing in more bullish expectations, anything is truly possible when it comes to these decisions.
Thus, investors looking to take a position on either side of this trade should be aware of the risks. As a long-term holding, buying before this decision appears to be just fine. Biogen has a reasonable valuation relative to its drug portfolio. However, as a trade, BIIB stock looks risky here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
