Wells Fargo downgraded Biogen (NASDAQ:BIIB) stock to Equal Weight from Overweight in the wake of the biotechnology company’s poor earnings report. The analysts also lowered their target price on the stock to $240 from $315.
“We are downgrading Biogen to Equal Weight as we see limited scope for near-term inflection due to: 1) Skyclarys US appears to be slowing already; 2) EU Skyclarys likely a 2025 story; and 3) Leqembi uptake is still slow,” analysts said.
Wells Fargo’s prior bullish outlook for BIIB hinged on Skyclarys's growth as the central narrative for 2024-25, analysts noted.
However, the company fell short of fourth-quarter sales expectations, posting $56 million against a consensus of $64 million. Moreover, remarks during the earnings call indicated “that the company is now in the "finding the patients" mode as the bolus has been treated.”
“Penetration is already >20%, and we see less room for upside surprise in the near term. EU approval is positive, but sales inflection could take time,” analysts commented.
Currently priced around $230 per share, BIIB is valued at approximately 15 times its 2024 earnings per share (EPS), which does not seem inexpensive given two factors.
Firstly, the expected EPS growth from 2023 to 2028 is likely to be in the high single digits, and secondly, there's a looming minor setback with Ocrevus royalties anticipated to halve following the introduction of the first biosimilar after 2029, the team pointed out.
“Ocrevus was ~50% of their 2023 operating profits. We also do not see strong catalysts in 2024 beyond the launch progress,” they added.