Biogen Update Oct. 21st, 2021
This is not a recommendation or proposal to do anything. The data written in this article is not guarranteed. It is my private personal opinion. I`m not independing as I own a position of Biogen shares.
My personal knowledge about pharmacy is very limited. It is difficult for me to evaluate medicine in terms of efficacy, market position, potential pricing and potential revenues. Hence I`m perhaps not the best analyst for pharmaceutical companies.
Biogen, Symbol: BIIB, is one of the largest biotech companies with revenues of about 11 bn$ and a market capitalization of nearly 40 bn$ (share price 270$). The company’s product line consists of a handful of very expensive and highly effective drugs used to treat serious diseases including multiple sclerosis (MS), leukemia, Alzheiner(new) and hemophilia. It adds a smaller less profitable biosimilar business. The biggest business is the MS business. The biggest new product is Aduhelm.
Chances & Risks
The numbers of Biogen are below that of 2020. Revenues, profits slipped with the loss of the patent protection of Tecfidera.
A West Virginia district court ruled that a key patent of Biogen on its top selling drug Tecfidera is invalid. Since this ruling the revenues of this biggest product are collapsing in the US. Biogen is appealing this decision. If Biogen succeeds it is big opportunity for Biogen.
On the other hand the FDA approved Aducanumab (Aduhelm) the first drug against Alzheimer. The efficazy of it is not very strong and it seems only slow down the desease a bit in mild cases. But it is the first and only treatment of it. As there are millions of poeple affected by it it has the potential to become a billion seller.
The general challenges for drug makers are...
- Many countries like the Europeans regulate the prices of drugs and thus limit the profits.
- Other countries as India often break the patents if the drugs seems too expensive.
- The duration of patents is limited
- It is to fear that the USA will regulate drug prices following the European example
Existing pharmaceutics loosing sooner or later their patent protection or are replaced by better ones. That means the revenues from the existing portfolio are declining sooner or later. The main question is if there are enough new products in the pipeline to replace the declining revenues from existing products.
Acc. to BIIB presentation the company has 9 products in phase III, 7 products in phase II and 13 in phase I(Q2/21 ). As a rule of thumb...For every 10 that head into clinical trials with high hopes, one will get to market. It is the question how many of these products are getting into the market and how well these products perform. But anyhow even if the lost revenues should not become replaced completly....the risk is limited as the share price is not high.
A reason to buy BIIB is the high return to the shareholders. BIIB does not pay a dividend but buys back plenty of its shares.
Some more reasons to buy BIIB:
Are its products relevant after 5 years? Yes. (+)
Short Product Development Cycle? No (-)
Long product cycle? Yes (+)
High Moats vs. competition? Yes (+)
Cyclical? No. People need medicine in good and bad economy. (+)
PE less than industry? Yes 10 less than 19.01(+)
Book Value growing? (+)
PEG ratio? -
Revenue per Share : (+)
Outstanding shares reducing? Yes, through buyback (+)
Some Data:
Number of Shares: 220,508,784 Outstanding 149 mio. Remainder treasury Shares. That is at a share price of 270$ a market capitalization of 40 bn$ (Oct. 21st, 2021).
The core MS business with the no 1 product Tecfidera is slipped down last year.
Pipeline
Aducanumab
Aduhelm (name of the drug, aducanumab is the name of the substance) is the first drug in the world approved by the FDA for the treatment of Alzheimer. It requires monthly infusions. Before prescribing the drug, doctors will first make sure their patient's brain has amyloid buildup, which typically requires an imaging scan or spinal tap. Patients will also need to be monitored with MRIs, to guard against small brain bleeds, hemorrhages, or an accumulation of fluid. About 6M people are suffering from Alzheimer's in the U.S., and as many as 1.4M could be eligible to take Aduhelm, per estimates from Cigna (16).
Informations:
Acc. to an agreement with Ionis, BIIB makes royalty payments to Ionis on annual worldwide net sales of SPINRAZA using a royalty rate between 11% and 15%, which are recognized in cost of sales within the consolidated statements of income. Royalty cost of sales related to sales of SPINRAZA for the years ended December 31, 2018, 2017 and 2016, it totaled $238.0 million, $112.4 million and $0.5 million, respectively.
News
October 11, 2021 Roche got a Breakthrough Therapy Designation by the FDA. It seems that the Roche Gantenerumab is easier to apply as the Biogen Aduhelm (18).
September 28, 2021 "Biogen accused of illegal practices to boost sales of multiple sclerosis drugs". "According to a lawsuit filed by the health insurer Humana (NYSE:HUM), the company is alleged to have offered the drugs Tysabri, Avonex, and Tecfidera for free on a temporary basis for multiple sclerosis patients who lacked medical insurance. After a few months, the company would encourage patients to sign-up for government-funded healthcare and then channel the “illegal copayment assistance to those same patients under the guise of unrestricted charitable giving,” Bloomberg reported quoting Humana (17)
March 08,2020 BIIB signed a partnership agreement with Sangamo for the use of zinc-finger technology to progress various neurological disease candidates. BIIB paid $350m in cash plus buying shares (13).
June 07,2019 BIIB announced that it bought Nightstar Therapeutics (NST), a clinical-stage gene therapy company, focused on adeno-associated virus (AAV) treatments for inherited retinal disorders. As a result Biogen got ded two mid- to late-stage clinical assets, as well as preclinical program, in ophthalmology. BIIB paid $800 million(5).
Shareholders from market screener (4)
Name %
PRIMECAP Management Co. 7.38%
The Vanguard Group, Inc. 7.20%
BlackRock Fund Advisors 5.40%
ClearBridge Investments LLC 4.39%
SSgA Funds Management, Inc. 4.39%
Wellington Management Co. LLP 2.75%
Fidelity Management & Research Co. 2.04%
AllianceBernstein LP 1.55%
AQR Capital Management LLC 1.50%
Northern Trust Investments, Inc. 1.38%
The big asset managers hold an important share of Biogen
References:
Biogen investor relations
(18) 2021/10/11 https://handelszeitung.ch/unternehmen/nun-hat-auch-roche-seinen-durchbruch-bei-alzheimer?utm_source=Handelszeitung+Newsletter&utm_campaign=d9c3088586-LUNCH_TOPICS_2021_10_11&utm_medium=email&utm_term=0_c1505081ea-d9c3088586-92780129
(15) 2020/07/28 https://www.fool.com/investing/2020/07/25/heres-why-biogen-just-blew-its-q2-earnings-out-of.aspx
(14) 2020/07/20 https://www.biopharmadive.com/news/biogen-loses-tecfidera-patent-case-mylan/580096/
(11) 2019/10/25 https://seekingalpha.com/article/4298721-biogen-amyloid-alzheimers-disease-rabbit-hole?dr=1
(10) 2019/10/25 https://seekingalpha.com/article/4298768-biogen-aducanumab-reversal-stunning-expect-repeat-alzheimers-drugs?dr=1
(7) 2019/10/22 https://seekingalpha.com/article/4297782-biogen-inc-2019-q3-results-earnings-call-presentation?dr=1
(6) 2019/07/26 https://seekingalpha.com/filing/4570750
(4) 2019/05/21 https://www.marketscreener.com/BIOGEN-4853/company/
(3) 2019/05/03 https://seekingalpha.com/article/4258810-biogens-share-price-will-likely-pressure-zolgensma-receives-fda-approval
(2) 2019/01/24 https://seekingalpha.com/news/3453349-biogen-1-percent-q1-beat-strong-spinraza-sales?dr=1#email_link
(1) 2019/01/29 https://seekingalpha.com/article/4236192-biogen-inc-2018-q4-results-earnings-call-slides?app=1&dr=1
2018/10 https://www.fool.com/investing/2018/10/23/cornings-growth-accelerates-as-investments-begin-t.aspx