With the exception of the occasional dip or spike to the outside, Biogen stock has been trading in a range between ~$200 and ~$400 a share for over a decade now. Despite being at the forefront of the battle against Alzheimer’s disease, the company’s revenue has actually fallen by over $2B since 2020 after its blockbuster Tecfidera lost patent protection in the US.
Patent cliffs are always lurking ahead for every brand-name drug a pharmaceutical company sells. In Biogen ‘s case, the loss of Tecfidera sales caused EPS to fall by a third, despite the company’s generous share repurchases. This kind of uncertainty helps to explain the stock’s lack of direction since 2013.
The good news is that even range-bound trading can sometimes tell us something about the future. The weekly chart of Biogen shown below puts the company’s entire public existence into Elliott Wave context.
It reveals that this is not Biogen ‘s first lost decade. The stock was dead money between 2000 and 2010, as well, before undertaking a ten-fold surge to $442 by March, 2015. It was roughly in the middle of that rally when BIIB entered the price range it has been trading in ever since. The sharp spike to a new record of $469 in June, 2021, was caused by the FDA’s approval of the company’s Alzheimer treatment.
In terms of Elliott Wave analysis, it all fits into a textbook five-wave impulse. The pattern is labeled (I)-(II)-(III)-(IV)-(V), where wave (II) is a running flat, while wave (IV) is a triangle correction. According to the theory, a three-wave correction follows every impulse. The sharp selloff from $469 to $187 must be its first wave – (A). If this count is correct, Biogen is currently trading in wave (B) up. Once it is over, another notable slump towards the 61.8% Fibonacci support level near $170 can be expected in wave (C). Now, let’s take a closer look at the structure of the decline from $469.
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As required, wave (A) is also a five-wave impulse pattern, labeled 1-2-3-4-5, where two lower degrees of the trend are visible within wave 3. It looks like waves A and B of (B) up are already in place. This means that we can expect a recovery in wave C to ~$360, where the 61.8% Fibonacci level should act as resistance this time. From then on, another 50% drop in wave (C) would make sense. It seems that the time for a sustainable rally above the $400 mark has not yet come for Biogen stock.
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