Shares of Biogen (BIIB) are under pressure after Bernstein analyst Aaron Gal cut his price target for the stock to $288 and said he sees potential downside of $100 on first quarter risks, namely the inter partes review institution decision on Tecfidera and futility analyses of amyloid beta drugs. Commenting on the stock weakness, Piper Jaffray Christopher Raymond told investors that he views it as a buying opportunity. While Raymond acknowledged that a worst case scenario does remove about $50 per Biogen share from his sum-of-the-parts analysis, he believes such a scenario is “very low probability.”
BERNSTEIN SEES POTENTIAL DOWNSIDE OF $100: Earlier on Tuesday, Bernstein analyst Aaron Gal lowered his price target for Biogen to $288 from $341, while keeping a Market Perform rating on the shares. The Biogen "debate" revolves primarily around the durability of the existing franchises, the value of the company's Alzheimer's opportunity, and the potential of the pipeline to generate new drugs, he contended. The analyst believes the stock's current risk/reward balance "captures these dynamics." In the first quarter of 2019, however, Biogen is facing "two significant risks," namely the inter partes review institution decision on its biggest drug, Tecfidera, and futility analyses of amyloid beta drugs - Roche's (RHHBY) crenezumab and potentially Biogen's own aducanumab, Gal noted. The analyst told investors that he views Biogen's near-term risk/reward as "sharply negative," adding that if a review of Tecfidera is instituted and one of the amyloid beta trials is stopped for futility, the stock "can easily" trade $100 per share lower. Moreover, Gal argued that even if one of these events goes against the company, Biogen can drop $30-$80 per share. On the other hand, passing both risks will likely only have "moderate upside" of around $30 per share as "both are assumed to be positive in sell-side consensus," he contended.
PIPER SEES WEAKNESS AS OPPORTUNITY: Attributing Tuesday’s weakness in Biogen shares to a peer’s research note raising concerns about Mylan’s (MYL) IPR challenge of Tecfidera’s ‘514 dosing patent, Piper Jaffray’s Raymond told investors that he had assumed that to be “a known issue.” While the analyst acknowledged that survival of previous challenges does not guarantee success, he pointed out that this marks the third challenge of ‘514, with both ending in Biogen’s favor. While a worst case scenario does remove about $50/share from his sum-of-the-parts analysis, by his read of the current case as well as the history, such a scenario is “very low probability,” he contended. Gal also pointed out that another concern on Tuesday centers on Roche’s planned 2019 futility analysis for crenezumab’s P3 trials as a potential read through to aducanumab’s 2020 read out. The analyst reached out to Roche who confirmed the timing, but he believes the odds of stopping for futility are “quite low.” Gal is “hard pressed to see this as a key risk factor for the stock,” and would be a buyer of Biogen on weakness. The analyst kept an Overweight rating and $400 price target on Biogen shares.
OPPENHEIMER CUTS TARGET, REITERATES OUTPERFORM: Oppenheimer analyst Jay Olson also lowered his price target for Biogen to $372 from $380 after co-hosting a call with a neurology expert to focus on several neuromuscular disorders and explore recent thoughts about spinal muscular atrophy. While Spinraza has a positive impact on maintaining independence, gene therapy and oral treatment are potential threats, he contended, adding that some reimbursement challenges facing Spinraza could be amplified with new modalities such as gene therapy. The analyst reiterated an Outperform rating on Biogen shares.
PRICE ACTION: In afternoon trading, shares of Biogen have dropped almost 7% to $291.98.
