Biogen Stock Down 6% Today – Time to Buy BIIB Stock?

The price of Biogen stock is down 6% today in pre-market stock trading action after Samsung Biologics stated that rumors concerning a potential acquisition of the biotech firm were not true.

Yesterday, a report from The Korea Economic Daily stated that Samsung’s biotech subsidiary was negotiating a deal with Biogen that reportedly valued the firm at around $42 billion.

Biogen stock rose 9.5% to $258.3 per share after these rumors started to circulate. However, Samsung Biologics said this morning that these reports were not true without providing more details.

According to media reports, it was Biogen’s management who approached Samsung looking for a deal. It is now unclear if the rumors were entirely false or if a proposal from the company was just rejected right away.

The news come only a few days after Biogen announced that it will be submitting the paperwork to commence what would be the final protocol for ADUHELM®, its flagship Alzheimer’s treatment, in March 2022.

This Phase 4 study will involve 1,300 early Alzheimer’s patients and will evaluate the effect of the drug 18 months after the treatment begins.

Meanwhile, on 17 December, Biogen informed investors that the European Union’s Committee for Medicinal Products for Human Use (CHMP) adopted a negative opinion regarding the company’s application to market aducanumab.

The committee stated that “although Aduhelm reduces amyloid beta in the brain, the link between this effect and clinical improvement had not been established”. Even though the company plans to seek re-examination of this opinion, this is considered a setback.

What could be expected from this biotech stock in light of these developments? In this article, I’ll be assessing the price action and fundamentals of Biogen stock to outline plausible scenarios for the future.

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Biogen Stock – Technical Analysis

Biogen stock has been on a sharp downtrend since the volatile price action seen in June back when the company reported that the FDA had granted ADUHELM™ accelerated approval for the treatment.

Considering the huge market for Alzheimer’s drugs and the absence of an effective treatment to reduce the progression of the disease, market participants reacted positively to the news by pushing the valuation of the company to over $60 billion. However, shares have been declining since then as the company’s financial risk is still high.

Yesterday’s uptick temporarily broke the downward price channel highlighted in the chart on the back of these false acquisition news. It is now possible that most of those gains will be shed now that the market realized that there is no deal on the table.

If that happens, odds are that the price of BIIB stock will continue to dive unless some positive news concerning its ongoing clinical trials are published.

Momentum indicators were favoring a bullish outlook before yesterday’s uptick but not necessarily a break of the price channel as there have been no changes to the situation of the business.

Moving forward, unless the price breaks above the 50-day simple moving average, the outlook for BIIB stock remains bearish and most of the gains the stock experienced yesterday seem poised to evaporate in the following trading sessions.

Biogen Stock – Fundamental Analysis

Biogen’s sales had been on an uptrend until 2019 but they have been declining in the past twelve months compared to previous periods as the company sold only $8.96 billion versus $10.69 billion it sold in 2020.

Meanwhile, the firm’s operating margins have also been suffering lately as a result of this disappointing top-line performance. Considering the huge market for its Alzheimer’s treatment and the absence of competitors whose drugs show elevated levels of efficacy in stopping the advance of the disease, the management expects that the approval of ADUHELM could be a game-changer for the business’s financial performance.

During the first nine months of this year, Biogen reported $1.2 billion in net earnings or nearly a third less than what it made last year.

For the entire fiscal year, the company expects to bring around $10.9 billion in revenue along with non-GAAP diluted earnings per share of $19.35.

Based on those estimates, Biogen is being valued at around 13 times its forecasted adjusted EPS for 2021 while the market expects a small decline in the firm’s profitability next year. This negative earnings growth is the reason why Biogen’s stock is trading at such low multiples.

Meanwhile, the firm’s long-term debt is quite high as it stands at $6.3 billion on total assets of $23.8 billion including $2.85 billion in cash, equivalents, and marketable securities.

However, during the first nine months of 2021, the company produced positive free cash flows of approximately $2.6 billion and opted to repurchase $1.8 billion in stock instead of reducing its long-term debt.

The approval of ADUHELM® – even if it is in the United States alone – could catalyze some positive momentum for Biogen next year. At these low trading multiples and based on the firm’s financial strength and strong cash flow generation capacity, the upside potential for Biogen seems to be higher than the downside risks.

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