EUR 850.00 For Business Accounts Only

Morningstar | Slightly Raising Our Biogen FVE on Strong 2Q Results, Ahead of BAN2401 Details

We've slightly increased our Biogen fair value estimate to $420 per share from $404 following strong second-quarter results. We've updated our model for $2.75 billion in share repurchases (at an average repurchase price around $286 per share, which represents a good value relative to our view of the firm's intrinsic value) as well as stronger long-term revenue tied to the manufacturing and sales of the firm's biosimilars (via its collaboration with Samsung Biologics). Demand for Biogen's MS drugs appears steady, and Spinraza continues to see solid U.S. revenue and strong growth, excluding the U.S. While the firm is steadily expanding its mid-stage pipeline with products from Pfizer (schizophrenia), TMS (stroke), and now AliveGen (neuromuscular diseases), these programs remain too early to have a significant impact on our valuation. In contrast, Biogen's Alzheimer's portfolio is having an increasingly important impact on our valuation. Tomorrow's presentation of detailed phase 2 data for amyloid antibody BAN2401 should shed more light on the drug's efficacy in Alzheimer's disease at higher doses, which will also reflect on the potential of Biogen's similar product aducanumab, which recently completed phase 3 enrollment and should have data in early 2020. We factor in $10 billion in amyloid antibody sales by 2027 if BAN2401 and aducanumab are approved and use a 60% probability of approval for both drugs. Very strong data could push us to increase our fair value estimate by as much as 10%, particularly if they are strong enough for a potential early regulatory filing, while data at the edge of statistical significance could lead us to decrease our fair value estimate by as much as 15%. We continue to see Biogen's steady neurology focus and increasingly diverse portfolio and pipeline as supporting a wide moat.

Beyond BAN2401 and aducanumab, Biogen is poised to see a significant uptick in data readouts over the next year, including head-to-head data for MS drug BIIB098 against Tecfidera (potentially improved gastrointestinal profile), Phase 1 data for ALS drug BIIB067 and Alzheimer's drug BIIB076 (tau antibody), Phase 2 data for BIIB074 in sciatica, and Phase 1/2 data for ophthalmology gene therapy BIIB087.

There is still significant risk surrounding Biogen's Alzheimer's program, as BAN2401 failed to achieve significant results at 12 months earlier this year. However, earlier this month, the firms announced that at 18 months, the highest 10 mg./kg. biweekly dose of BAN2401 showed a statistically significant ability to slow clinical decline, based on an Alzheimer's disease composite score, relative to placebo. Looking solely at this dosage, benefits were seen as early as six months into treatment, and brain imaging indicated reduction in brain amyloid, which fits with the drug's expected mechanism of action. For more background on the amyloid hypothesis and the drugs in development for Alzheimer's, see our Healthcare Observer, "Wide-Moat Firms in Alzheimer's Disease: Why the Market Is Mispricing the Opportunity."