The Alzheimer's Treatment Could Help This Biotech Stock Outperform

It's safe to say that Biogen is likely to be affected by a number of positive catalysts in the coming quarters, according to Piper Sandler. 

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Biogen has been upgraded to overweight from neutral by analyst Christopher Raymond. The price target for the stock has also been raised from $280 to $346. Based on Friday's closing price, the new target suggests an upside of 20.3%.

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Leqembi, a joint development between Biogen and Eisai, is Biogen's foremost catalyst for Alzheimer's treatment. By July 6, the Food and Drug Administration will have approved Leqembi in its entirety. Following the FDA's approval, Medicare and Medicaid Services announced earlier this year that Leqembi would receive broader coverage. 

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The uptake of the drug will indeed accelerate once it receives full approval and full CMS reimbursement (both of which seem likely). According to Raymond, the share of patients with the drug is currently minimal (0.7% of patients), but within six months it will almost quadruple. 

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“For reference, US consensus this year is just $49M and in 2027 it is $2.9B. If we assume these projections to be accurate, we will have an annual US run rate above $500M within 6 months, and over $5.4B at peak," Raymond added. 

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In addition to the pending full approval, Raymond said the significant delay is the most significant obstacle to his ambitious growth plans. Under the current accelerated approval process, 75% of doctors said they would never prescribe Leqembi - but within a year of a full approval, the number rises to over 80%. “We also address an important investor concern - almost 80% of doctors today report adequate capacity for infusions, but that number drops to 70% once full approval is granted,” Raymond said.  

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“There are also concerns about the cumbersome existing diagnostic protocol and ARIA, but these appear to be manageable,” these experts said. Our thinking is - in contrast to Aduhelm - docs will find a way to get this drug to patients because they believe in its clinical utility – especially for Alzheimer's specialists – in contrast to a very interesting dynamic where most doctors see Leqembi's CLARITY AD result as clinically meaningful. As its efficacy has been questioned, Aduhelm has fallen behind Wall Street's expectations as a controversial Alzheimer's treatment. 

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"We believe Leqembi has set a high standard in terms of safety," Raymond said. Despite the fact that management has already mentioned some cost savings, especially through the dismantling of the Aduhelm commercial effort, we anticipate even greater expense leverage. 

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In the pre-market on Monday, Biogen shares were up 1.3%. The stock has gained 4% in 2023. In the past year, it has gained 35%.

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“In summary, based on this Leqembi feedback and our expectation of a new era at Biogen, we now consider the stock to be a potential buyer. Buyers, here we come."

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