Biogen’s Alzheimer’s Drug Aduhelm Controversially Approved by FDA
August 31, 2022
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Biogen Intrinsic Value –
Biogen($NASDAQ:BIIB) is a pharmaceutical company that is currently best known for its Alzheimer’s drug Aduhelm. Despite its two Phase 3 trials of Aduhelm being abandoned after failing a futility analysis, the company managed to find some data in one of the two trials supporting a statistically significant, positive effect on the slowing of cognitive decline. Despite an FDA Advisory Committee voting 10-0 against approval, Aduhelm was initially granted marketing authorisation with few restrictions by the agency itself, sending Biogen’s share price soaring from ~$265, to $395
a gain of ~50%. That was as good as things got for Biogen and Aduhelm, however, as despite analysts forecasting that Aduhelm would generate sales in the double-digit billions, concerns over efficacy, safety
due to instances of brain oedema, or swelling
Biogen wanted to charge $56k per annum
led to a backlash against the approval. Ultimately, the Centers for Medicaid and Medicare opted against providing reimbursement for Aduhelm for anything other than clinical trials, all but ending Aduhelm’s chances of making meaningful sales. Biogen is a Pharma that researches cures for some of the toughest to treat central nervous system diseases, so there will always be intense scrutiny of the drugs it develops and attempts to bring to market. Given Biogen’s clinical trial failure rate is high, its stock will not suit every investor’s appetite for risk. On the other hand, an overlooked fact is that Biogen has traditionally been an exceptionally profitable company. The long-term effects of Aduhelm’s approval on Biogen are yet to be seen.
However, in the short term, the controversy surrounding the drug’s approval has led to a decline in Biogen’s share price and a decrease in forecasted sales for the drug. This could have a negative impact on Biogen’s earnings in the short term. Only time will tell if Biogen will be able to weather the storm and rebound in the long term.
Many people believe that the drug is not effective and may even be harmful.
However, Biogen’s stock opened at $197.2 and closed at $197.1 on Monday, indicating that investors are confident in the drug.
VI Analysis – Biogen Intrinsic Value
Company’s fundamentals are a reflection of its long term potential. The below analysis on BIOGEN is made simple by the VI app. The fair value of a BIOGEN share is around $302.8, as calculated by the VI Line. Currently, BIOGEN stock is traded at $197.1, meaning it is undervalued by 35%.
The approval of Biogen’s Alzheimer’s drug Aduhelm has been controversial, with some experts arguing that the evidence supporting its efficacy is weak.
However, the drug does offer a potential new treatment option for patients with this devastating disease, and its approval by the FDA represents a significant step forward. Investors who believe in the potential of Aduhelm may want to consider buying Biogen shares. Although the stock is not cheap, Biogen is a well-established biotech company with a strong track record of success. If Aduhelm proves to be effective, it could be a major driver of Biogen’s growth in the coming years.
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