After a 13% rise in Biogen stock (NASDAQ: BIIB) this year, aligning with the broader S&P500 index returns, we believe it has little room for growth. Looking at a slightly longer term, BIIB stock is up 6% from levels seen in late 2019. This can be attributed to 1. the company’s P/S ratio rising 24% to 4.5x trailing revenues, 2. a 17% fall in its average total shares outstanding to 145 million, partly offset by 3. a 29% decline in Biogen’s revenue to $10 billion over the last twelve months. Our dashboard on Why Biogen Stock Moved has more details.
The decline in Biogen’s revenue in recent years can primarily be attributed to generic competition for its multiple sclerosis drug – Tecfidera. Unfavorable currency exchange has also weighed on the overall sales for Biogen. The company’s operating margin has contracted from 49% in 2019 to 34% in 2022. Our Biogen Operating Income Comparison dashboard has more details. Despite lower revenue, BIIB stock has seen a rise this year due to the developments around its pipeline. Late last week, a U.S. FDA panel backed approval of Biogen & Eisai’s Alzheimer’s treatment – Leqembi. [1] Earlier in January this year, the drug garnered accelerated approval. This is a large drug for both companies, with peak sales estimated at around $10 billion.
Leqembi removed built-up plaque in the brain called beta-amyloid, resulting in a cognitive benefit for patients with early-stage Alzheimer’s disease in its late-stage clinical trials. Note that Biogen also secured regulatory approval for Aduhelm to treat Alzheimer’s disease in 2021. However, it saw a much slower rollout than anticipated. Aduhelm was considered the prized win for Biogen, but some experts didn’t favor its approval. Investors hope Leqembi will secure regulatory approvals and drive revenue growth for Biogen over the coming years.
Looking at its stock price, we believe BIIB stock has little room for growth. At its current levels of $304, it is trading at 4.5x trailing twelve months’ revenue, compared to its last five-year average of 3.1x. Our Biogen Valuation Ratios Comparison dashboard offers more details. Given the positives of Leqembi, an upward revision in the company’s P/S multiple is justified. Still, given the uptick in the recent past, it appears that much of the positives are now priced in.
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