Goldman Sachs added Biogen to its Americas Conviction List, highlighting the biotech company's lead pipeline Alzheimer's drug as possibly one of the first to successfully prevent or slow the progression of the disease.
"Biogen has a broad Alzheimer's disease portfolio, which, if successful, would allow it to access a greenfield, blockbuster market opportunity," wrote Goldman analyst Terence Flynn. "It is difficult to overstate the growing societal burden of Alzheimer's disease. … By 2050, one new case of Alzheimer's disease is expected to develop every 33 seconds in the United States."
Cambridge, Massachusetts-based Biogen focuses on discovering and developing therapies for neurological and hematologic disorders including multiple sclerosis and hemophilia. Through a partnership with Eisai, the companies have two Alzheimer's drugs in late-stage development, both of which could be huge money generators.
Goldman projects that sales of one of the drugs, Aducanumab, could reach $12 billion.
The analyst has a $338 price target on Biogen, representing 17 percent upside from Tuesday's close. The shares rose 2.5 percent Wednesday morning after Goldman's call.
Biogen is also a key player in treatment of multiple sclerosis, handling 38 percent of all MS patients globally. With more and more competitors entering the MS market, Biogen has started to feel pressure on some of its established drugs.
"MS is a mature market and competition has been increasing. But while generics and other new entrants could capture share, we don't expect wholesale 're-pricing' of the category," Flynn said.
In all, Goldman Sachs not only sees room for drug catalysts, but additional business development could provide Biogen with free cash.
"Our firepower analysis suggests $14 billion in capacity, which is above what management discussed on the 2Q call regarding the maximum size deal it could pursue," Flynn wrote.
"Hence, in addition to potential business development deals, we believe the company could more aggressively repurchase shares."