Biogen is one of the top-notch firms in the biotech space. With sales of over $12.7B in 2019, the stock has been very generous to investors in the past. In fact, it is one of only five companies mentioned in Christopher W. Mayer’s book “100-Baggers” that have returned 100 to 1 in under six years.
Unfortunately for Biogen holders, it wasn’t the past six years when that happened. The stock reached an all-time high of $442 a share in March, 2015, and has been trading below this level since. Yesterday, it closed at $241.55, down over 45% from its 2015 peak.
In recent years Biogen’s stock price has been reflecting the uncertainty around two of the company’s drugs – Tecfidera and Aducanumab. The first one accounts for over 30% of the company’s sales, but its patent protection has been under constant attacks in court from generic rivals. The second one was Biogen’s Alzheimer cure candidate, which, if approved, was practically guaranteed to become a blockbuster.
Making Sense of Biogen ‘s Alzheimer Conundrum with Elliott Wave Analysis
We, at EWM Interactive, are complete laymen when it comes to biotech. We had absolutely no idea what the outcome for these two drugs will be. Apparently, even Biogen’s management had no idea. However, from an Elliott Wave perspective, which is our specialty, Biogen’s Alzheimer saga makes sense. Let’s take a look.
It all started with an impulsive decline down to $205 a share by late-June, 2016. From then on, the stock price went up and down in a wide range, in response largely to news about Biogen’s Alzheimer candidate. Sharp moves of 20% to 40% in both directions were not uncommon.
The shares rose sharply on July 5th, 2018, after positive Phase 2 trials. Then, they fell brutally on March 21st, 2019, after the company reportedly terminated studies of the drug due to lack of efficacy. Just seven months later, however, on October 22nd, 2019, Aducanumab was brought back from the dead. Biogen stock surged 40% that day.
Meanwhile, troubles for Tecfidera mounted. In August, 2020, a generic version of the drug was approved after a federal judge had previously invalidated its patent. By early-November, 2020, BIIB was back down to the low $240s.
BIIB’s Roller Coaster Produces a Clear Triangle Pattern
Hope was still alive, though, as the Food and Drug Administration said Biogen’s Alzheimer candidate was “highly persuasive” in a Phase 3 trial. November 4th saw another 40% rally on the news. Unfortunately for both investors and patients, their optimism was misplaced. On Friday, November 6th, the FDA’s advisory committee gave the drug a thumbs down, saying it wasn’t effective enough. When the market opened on Monday, November 9th, Biogen stock was down 30% again.
What is fascinating is how all these news and events fit together to form a textbook triangle pattern. It is labeled A-B-C-D-E in wave (B). If this count is correct, a huge (A)-(B)-(C) zigzag correction has been in progress since the 2015 top. This means the latest crash must be part of wave (C).
Its targets lie beneath the bottom of wave (A), making the sub-$200 levels reachable for the bears. $180 and even $150 a share make sense from here, not only because of the Elliott Wave logic, but also because Tecfidera sales are projected to fall off a cliff and Aducanumab’s death is just a formality now.
Once there, Biogen would probably be in the bargain bin and buyers should start to slowly emerge again. In the biotech space, one never knows, but according to the Elliott Wave theory, when a correction is over, the larger trend resumes. Prior to March 2015, the stock was clearly in an uptrend…
Sources: Seeking Alpha
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