Buy Biogen, as stock looks 'too good to ignore,' Wells Fargo says

Published Mon, Apr 18 20228:01 AM EDTUpdated Mon, Apr 18 20221:51 PM EDT

Investors are underestimating a new Alzheimer's drug from Biogen and some of the company's other key businesses, according to Wells Fargo. "Our call assumes that investors would assign at least 50% probability to BAN-2401 [lecanemab] into the data event," wrote analyst Mohit Bansal. "While Alzheimer's is hard to handicap, we note that it is one of the biggest catalysts of the year, and we see investors taking an equal weight position in Biogen at minimum post 1Q EPS. Given the attractive risk/reward, we think this trade is too good to ignore at this point." Wells Fargo upgraded the stock to overweight from equal weight and slapped a $265 price target on Biogen, which implies a 24.7% return from its previous close price. Biogen shares have struggled in the past year, falling more than 20%, as aducanumab — another Biogen drug that aims to treat Alzheimer's — has come under criticism since gaining approval from the Food and Drug Administration. Some health officials have been skeptical about the effectiveness of aducanumab, which is sold under the name Aduhelm, and many decried the drug's high price, with Biogen later slashing the cost. But at Biogen's current stock price, Wells Fargo sees greater upside potential and a "very compelling risk/reward" ahead of the release of new Alzheimer's drug data in the second half of the year. "From where the stock is currently ($213/sh), we see $35/sh (~15%) downside risk but up to $135/sh ( > 60%) upside potential on the data," Bansal wrote. Aside from its Alzheimer's drugs, Bansal said, investors are undervaluing Biogen's royalty streams — which Wells Fargo estimates make up 15% of current revenues and 40% of its valuation. Bansal also said more investors could rotate into Biogen after Eli Lilly releases data on its obesity drug. Wells Fargo trimmed earnings per share estimates on Biogen for 2022 and 2023. Shares of the biotechnology company have fallen 11.4% since the start of the year but are trading up about 1% this month. Correction: This story has been updated to reflect that the Biogen Alzheimer's drug, BAN2401, that Wells Fargo referred to in its analyst report is lecanemab. A previous version of this story incorrectly attributed facts about another Biogen Alzheimer's drug, aducanumab (Aduhelm), to BAN2401.

A Biogen facility in Cambridge, Massachusetts.

Brian Snyder | Reuters

Investors are underestimating a new Alzheimer's drug from Biogen and some of the company's other key businesses, according to Wells Fargo.