Biogen Stock Down 9% Today – Time to Buy BIIB Stock?

The price of Biogen stock is down 9% today in pre-market stock trading action following news that its recently approved Alzheimer’s drug will only be covered by Medicare for patients who have been enrolled in an approved clinical trial.

In a statement released yesterday, the company said that this requirement “denies nearly all Medicare beneficiaries from accessing ADUHELM®” and called for a change in this draft decision so patients can receive reimbursements in the same way they do for other therapies that seek to treat progressive diseases.

A quick search of ADUHELM® on the website of the Centers for Medicare & Medicaid Services (CMS) shows that the agency has drafted a proposed decision memo that approves coverage for the treatment “under Coverage with Evidence Development (CED) in CMS approved randomized controlled trials”.

There is still a 30-day open comment period within which Biogen plans to issue “a formal response” to this preliminary decision. A final decision on how the agency will be covering the treatment should be issued in April 2022.

Market participants are reacting negatively to the news as this decision could dramatically limit the number of patients who will be receiving ADUHELM®. Biogen stated that it could take a year or longer to start enrolling patients for a trial.

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

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Biogen Stock – Technical Analysis

In a previous article about Biogen, I stated that unless the price decisively broke above the 50-day moving average the outlook for the stock remained bearish as the downtrend would remain intact.

Even though the price action that followed that 30 December uptick broke above the descending price channels shown in the chart, the false rumors of an acquisition of Biogen ended up evaporating the only catalyst that could support a trend reversal.

Meanwhile, today’s development is quite negative for the firm’s growth prospects and it remains to be seen if Biogen will manage to overturn this setback once it sends its comments to the CMS regarding the implementation of the CED scheme for ADUHELM®.

Today’s decline is plugging the price back into the channel and that favors the continuation of the downtrend that BIIB stock has been experiencing since its June 2021 peak.

Biogen Stock – Fundamental Analysis

This recent decision from the CMS has been just another setback in Biogen’s path to get ADUHELM® on track. Since the firm’s sales have been declining for years, the market is counting on the company’s ability to market this drug to turn around its financial performance.

However, if the CMS ends up deciding to adopt the CED scheme, the market for ADUHELM® in the United States will shrink significantly.

For 2022, the consensus earnings estimate for Biogen stands at $18.41 resulting in a 4% decline compared to the figure reported a year ago. Meanwhile, the market is also estimating a 4% decline in the firm’s revenues for the year at $10.4 billion.

This reflects that analysts are still skeptical about the possibility that ADUHELM® will start to contribute positively to the performance of the company this year.

With this in mind, this setback might not necessarily accelerate the decline of BIIB stock but it does favor the continuation of the current downtrend.

Based on the market’s consensus estimate for BIIB’s earnings for 2022, the forward P/E ratio stands at 15x. This ratio is particularly low as the prospects for ADUHELM® remain promising.

In addition to that, Biogen’s balance sheet is robust as its long-term debt is manageable while the firm’s cash flow generation capacity is quite decent as well.

All things considered, the upside potential seems to exceed the downside risks at the moment for investors with the stomach to tolerate some more negative volatility down the road.

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