On Wednesday, Citi initiated coverage on shares of Biogen (NASDAQ:BIIB), assigning a Neutral rating and setting a price target of $190. The new coverage reflects a cautious stance on the biotechnology company's financial outlook due to pressures on its legacy franchises.
Biogen's core products, including treatments for multiple sclerosis (MS), spinal muscular atrophy (SMA), and royalties from anti-CD20 therapies, have experienced declining compound annual growth rates (CAGRs) of -12%, -3%, and -2% respectively. The company has aimed to counteract these declines by focusing on developing treatments for diseases with significant unmet medical needs, such as Alzheimer's, ALS, lupus, stroke, and Parkinson's disease.
While Biogen has seen some success with the recent launch of its Alzheimer's drug Leqembi and other products acquired through mergers and business development, such as Skyclarys for Friedreich's ataxia and Zurzuvae for postpartum depression, the overall clinical risk in Biogen's pipeline remains higher compared to its peers in the Big Biotech space.
Despite the challenges, Citi acknowledges the potential for revenue stabilization from legacy franchises and growth from new product launches. However, projections for 2024-2026 show an average revenue decline of 2% and a non-GAAP EPS increase of 2%, which lags behind industry peers that are expected to have stable revenues and a 4% increase in non-GAAP EPS.
Looking ahead, Citi anticipates that Biogen could return to a more favorable growth profile post-2027. Upcoming data from clinical trials of BIIB080 for Alzheimer's, BIIB091 for MS, and BIIB122 for Parkinson's could provide significant option value, though these opportunities also carry a higher level of risk.
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