[Biotech&Pharma] Is Biogen Stock A Buy On Renewed Hope In Alzheimer's Disease?

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Biogen stock was on a roller coaster in 2019. The biotech company lost nearly 30% of its value last March after scrapping two studies of an Alzheimer's treatment. On a single October day, Biogen (BIIB) shares rocketed more than 26% after broader analysis suggested the drug actually works.




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So, there are glimmers of hope.

The biotech company expects to ask for Food and Drug Administration approval of its experimental Alzheimer's treatment in early 2020. Biogen is also testing a higher dose of its spinal muscular atrophy treatment, Spinraza, amid competition from Novartis' (NVS) gene therapy, Zolgensma.

So, as Biogen rebuilds its efforts in Alzheimer's treatment with aducanumab, is now the time to invest in Biogen stock? (RELATED: Is it time to buy or sell these other large-cap stocks?)

Biogen Stock Analysis: Earnings, Sales Rise

Biogen's biggest chunk of sales stems from treating multiple sclerosis. The biotech company also makes spinal muscular atrophy treatment Spinraza, as well as biosimilars of key drugs from Amgen (AMGN), AbbVie (ABBV) and Johnson & Johnson (JNJ).

Notably, the biotech company has nine quarters of sales and earnings growth under its belt. But growth has been choppy. In the third quarter ended Sept. 30, Biogen earnings popped 24% to $9.17 a share, minus some items. Sales climbed 5% to $3.6 billion.

Biogen earnings don't consistently line up with CAN SLIM rules for investing, which encourage investors to seek stocks with at least 25% earnings growth. Also, quarterly sales growth hasn't been in the advised 20%-25% range for years.

That trend is expected to continue in the fourth quarter. On average, analysts polled by Zacks Investment Research call for Biogen earnings of $7.94 per share on $3.53 billion in sales. On a year-over-year basis, earnings would rise 13.6% and sales would be flat.

Biogen stock has a Composite Rating of 97 out of a best-possible 99. The CR is a 1-99 score of a stock's key fundamental and technical growth metrics. This means its shares outrank 97% of all stocks — regardless of industry group — in terms of key growth measures.

Meanwhile, shares of the biotech company have a bullish EPS Rating of 97, reflecting Biogen's two-year streak of quarterly earnings growth. That puts Biogen stock in the top 3% of all stocks by earnings metrics.

Technical Analysis Of Biogen Stock

Biogen stock is currently forming a flat base with a buy point at 318.10. But as of the close on Jan. 3, shares were roughly 8.6% below that potential entry.

As of the close on Dec. 4, Biogen stock was well above its 200-day moving average, but shares recently slid below their 50-day line. That follows a 26.1% move in high volume on Oct. 22 after the biotech company said it would ask the FDA to approve its Alzheimer's treatment.

But Biogen stock has lagged the S&P 500 since mid-2015. This means for the better part of three years investors would have been better off buying a mutual fund or ETF tracking the S&P 500 than investing in Biogen stock.

Shares have a strong Relative Strength Rating of 83. The RS Rating measures a stock's 12-month performance. Leading stocks tend to have an RS Rating of 80 or above.

What Does 2018 Say About The Biotech Company?

In 2018, Biogen posted 10% revenue growth, hiking from 7% in 2017 and 6% in 2016. But the biotech company remains far from a multiyear high of 40% growth in 2014. Earnings growth also has been choppy, rising 20.1%, 7.9% and 18.9% over the past three years, respectively.

For the year ended Dec. 31, analysts call for Biogen earnings of $33.14 a share, on an adjusted basis. Earnings would rise a healthy 26.5%. But analysts expect sales to grow just 5.8% to $14.24 billion.

Lackluster Multiple Sclerosis Drug Sales

Biogen's biggest moneymakers include multiple sclerosis treatments like Tecfidera and Tysabri. In the third quarter, multiple sclerosis treatment sales dipped a fraction to $2.16 billion.

During the second quarter, sales were flat. In the third and fourth quarters of 2018, sales slipped 3% and 1%, respectively.

Further, Mylan (MYL) is also looking to knock off Tecfidera with a biosimilar copy. Biosimilars are less expensive versions of biologic drugs. The U.S. Patent Trial and Appeals Board is set to issue a decision on Mylan's challenge to Tecfidera's key patent in February.

Sales of Spinraza are also facing a challenge from Novartis' gene therapy, dubbed Zolgensma.

It's also important to note patients receive several “loading doses” of Spinraza in their first year of treatment. Then, they move to less frequent maintenance dosing. Sales of Spinraza now are growing at a slower pace as more patients move to the maintenance schedule.

Spinraza sales growth was 17% in the third quarter, down from 73% growth in the fourth quarter of 2018.

Biogen Stock News: An Acquisition, A New Rival

On Oct. 22, Biogen stock rocketed 26.1% after the biotech company said Alzheimer's treatment aducanumab actually showed promise in a broader analysis. This followed Biogen's decision in March to scrap two studies of the drug that appeared likely to fail.

In December, Biogen unveiled the results of that broader analysis, which was limited to patients who received a full schedule of the high dose. On a measure of cognition, aducanumab showed a 30% benefit in a study called Emerge, and a 27% benefit in the test called Engage.

But, in September, the biotech company shuttered two studies of another experimental drug in Alzheimer's treatment, elenbecestat.

Biogen is still studying several potential treatments for Alzheimer's disease. The biotech company is also in Phase 3 testing of a treatment for amyotrophic lateral sclerosis — also called Lou Gehrig's disease — as well as stroke and choroideremia, a rare eye disease.

The latter stems from Biogen's acquisition of Nightstar Therapeutics for $800 million in June.

Notably, in May 2019, rival Novartis gained approval for a spinal muscular atrophy gene therapy.

Also in September 2019, Biogen announced its plan to test a higher dose of Spinraza.

Is It Time To Invest In Biogen Stock?

The short answer is no, it's not time to buy into Biogen stock.

Shares of the biotech company are forming a flat base, but aren't near a buy point. Further, although sales and earnings are growing, they are still out of line with CAN SLIM rules for investment. Analysts also don't expect those metrics to come in line with savvy investing rules in the fourth quarter.

Aducanumab stands a chance of being a high point for Biogen. But analysts expect Biogen stock to be choppy as investors digest the significance of the new light being shined on the drug. There's also no guarantee the FDA will approve aducanumab in Alzheimer's treatment.

This comes as Biogen faces a new rival in spinal muscular atrophy and stale sales of multiple sclerosis treatments.

Investors should keep an eye on sales growth as well as ongoing efforts for new multiple sclerosis treatments. The election season is also often volatile for biotech companies as candidates focus on health care and drug prices.

Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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