Withdrawal of MS anchor tied to Biogen

May 15, 2018 03:32 PM

Massachusetts-based Biogen Inc. (BIIB), founded in 1978, focuses globally on the research, development and manufacturing of products to combat various neurological and neurodegenerative diseases. 

BIIB appears to have suffered a significant short circuit as a growth position moving closer toward a progressive long-term strategy short holding. BIIB is known for its treatments for multiple sclerosis (MS), marketing brands such as Tecfidera, Avonex, Plegridy, Tysabri, Zinbryta and Fampyra. The combination of BIIB’s recent issues regarding Zinbryta, potential competition and its medication’s inability to pass recent testing stages for further approval to increase its usage are clear signs of volatility. 

Many analysts and brokerages have recently touted BIIB as a potential buying opportunity, including Deutsche Bank, due to Q4 earnings results released on Jan. 25. BIIB reported earnings of $5.26 per share, which narrowly missed the consensus estimate of $5.44. However, its revenue of $3.31 billion dollars surpassed the consensus of $3.07 billion by 7.6%. While seemingly positive news, BIIB continued its negative trend by 18% following its earnings report. Additionally, the lower tax rates set by Congress have been viewed as an additional positive indicator for BIIB reflected in its Q4 $3.06 billion report and its earnings-per-share of $5.75, closely matching the consensus of $3.08 billion dollars and $5.55 respectively. However, this can be better interpreted as an unexpected benefit while BIIB continues its downward momentum within the broader context. 

These issues for BIIB can be attributed to four significant factors. The first being the investigations in the fall of 2017 regarding its power drug Zinbryta, which attracted significant media attention in the United States due to its price of $87,000. This lead to Congressman Elijah Cummings (Dem. MD) attempting to pressure the government to take action. The second being the voluntary global withdraw of marketing authorizations for Zinbryta in light of the European Medicines Agency (EMA), which has recommended the immediate suspension and recall of Zinbryta. 

The recommendation to suspend and recall Zinbryta has now been sent to the European Commission for a legally binding decision to determine its fate. Third is BIIB’s Tysabri medication, which failed additional rounds of testing. This would have expanded the scope of the drug’s use increasing its market potential. Finally, its product Spinraza faces significant competition from other companies, which may erode BIIB’s current and future hold within the market. 

BIIB’s breakdown is evidenced by its erratic chart pattern developed in late October 2017 when it plunged more than 10% from $344 to $307 (see “Biogen dive”). The reversal in base-building was responsible for trading above 50-day moving average and it steadily regained ground up until Jan. 26.  A clear negative trend was confirmed when it took out that late October low, plunging more than $20 on Feb. 14. This move took out the 50-day moving average and then the 200-day with its own Valentine’s Day massacre. A reversal could meet primary resistance at $300 to $307. At that point, selling pressure may resurface and continue the downtrend pattern.  

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