On Monday, Biogen Inc. (NASDAQ:BIIB) faced a downgrade from a Jefferies analyst from Buy to Hold, with a significant reduction in the price target to $180 from the previous $250. The downgrade is attributed to several key concerns outlined by the analyst, including modest expectations for the Alzheimer's treatment, Leqembi, and the need for the company to adjust its sales projections downward.
The analyst pointed out that their forecast for Leqembi's revenue in 2025 is set at $466 million, which is below the consensus estimate of $494 million. Looking further ahead, their 2030 projection stands at $1.6 billion, starkly lower than the consensus of $4 billion. This adjustment reflects a cautious stance on the drug's market performance.
Another significant factor contributing to the downgrade is the perceived lack of exciting developments in Biogen's pipeline, which could spark investor interest. The company is believed to require a "new shiny thing" and is expected to need more business development, which could take time despite having a reported $7-10 billion capacity for potential deals.
The third issue raised by the analyst revolves around the company's financial outlook related to its Ocrevus royalty. They anticipate a substantial decline in these royalties by 2030, as a biosimilar is likely to be approved by the FDA, with two candidates currently in Phase III trials. This expected approval could result in a 50%+ step down in Ocrevus royalties, translating to a 20-30% impact on Biogen's earnings per share (EPS) power in 2030.
The analyst concluded that while there is a bull case considering the negative sentiment potentially already reflected in the stock's price and a valuation that nearly excludes Alzheimer's treatment prospects, they do not foresee the stock performing well until the company enacts changes. The new price target of $180 is based on a 10x P/E ratio.
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