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On Monday, HSBC analysts adjusted their stance on Biogen stock, downgrading it from "Buy" to "Hold" and significantly reducing the price target to $118 from the previous $342. The revision follows concerns over the pharmaceutical company’s growth drivers and their underperformance. According to InvestingPro data, 13 analysts have recently revised their earnings expectations downward, though the stock appears undervalued based on Fair Value analysis. The current stock price of $118.84 represents a 50% decline from its 52-week high of $238.
The analysts’ previous "Buy" recommendation was anchored on the expectation that Biogen’s growth drivers, namely Leqembi and Skyclarys, would compensate for the decline in its established multiple sclerosis franchise. However, these products have not met expectations. Leqembi’s uptake has been slower than anticipated, and Skyclarys is facing challenges in patient acquisition. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with a healthy 76% gross profit margin and robust free cash flow yield of 16%.
The revised sales projections have led to a tempered growth outlook for Biogen. HSBC now forecasts a marginal growth of 1% from 2027, despite anticipating some improvement in margins due to ongoing efficiency measures within the company. Recent data from InvestingPro reveals a revenue decline of 1.62% over the last twelve months, though the company maintains a favorable P/E ratio of 10.66 relative to its near-term earnings growth potential. Get access to 7 more exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report.
The analysts also noted the risks associated with Biogen’s pipeline, particularly in the areas of Alzheimer’s and Lupus, where upcoming readouts present above-average risk. The company’s ability to generate growth through external innovation is deemed crucial, yet current visibility into these efforts is lacking.
Biogen’s recent actions, such as cost-cutting, program terminations, and a royalty deal with Royalty Pharma for the drug litifilimab, indicate a strategic shift towards using existing assets for funding. The analysts emphasized that for Biogen stock to perform well, the company’s management must demonstrate that its research and development efforts are yielding results and that it can effectively deploy capital in a way that the market views as value-creating.
In other recent news, Biogen Inc (NASDAQ:BIIB). has announced that the U.S. Food and Drug Administration (FDA) granted Fast Track designation to its investigational drug, BIIB080, aimed at treating Alzheimer’s disease. This designation is intended to expedite the development and review of therapies for serious conditions with unmet medical needs. Additionally, Biogen has shifted its research and development strategy, focusing on significant collaborations, as highlighted by a $165 million charge related to its partnership with Stoke Therapeutics (NASDAQ:STOK). In the financial realm, RBC Capital Markets has slightly reduced its price target for Biogen to $221, maintaining an Outperform rating, while UBS adjusted its target to $134 from $157, keeping a Neutral rating. RBC Capital noted that Biogen’s revenues are expected to align with consensus estimates, with Spinraza slightly outperforming expectations. Meanwhile, Organon has acquired the U.S. rights to TOFIDENCE™, a biosimilar to ACTEMRA®, from Biogen, marking a significant move in the biosimilar market. These developments reflect Biogen’s ongoing efforts to innovate and adapt within the pharmaceutical industry.
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