Biogen's Drop Looks Like Overreaction
We've lowered our fair value estimate, but the shares remain attractive.
Tecfidera's slowdown, mixed data for aducanumab in Alzheimer's disease, and two smaller pipeline disappointments (Tysabri in stroke and neublastin in sciatica) have put pressure on Biogen (BIIB), but we think the market has overreacted to these developments. While we've slightly lowered our fair value estimate to $400 per share, we still think the shares are undervalued and the firm's wide economic moat is secure. We remain bullish on upcoming clinical data over a longer time horizon (2015-18) and think the firm has a promising collection of neurology-focused pipeline candidates.
Biogen reported disappointing second-quarter results and lowered its guidance for the full year, largely because of lower demand for Tecfidera in the United States and a weaker pricing environment in Europe. We think the competitive landscape in multiple sclerosis has been intensifying for some time, and Tecfidera safety concerns (two cases of progressive multifocal leukoencephalopathy in the past few months) and tougher European price negotiations (evidenced by the recent price cut in Germany) have exacerbated the situation. We think Tecfidera still has room for additional patient growth outside the U.S., but U.S. growth could be more limited, and we're lowering our peak sales estimate from $6.3 billion to $4.8 billion in 2018.
Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.