Biogen (NASDAQ:BIIB) dropped an incredible 34% last week after months of holding the $280 - $350 range. At a $216.71 close on Fri. March 22, value investors may want to bottom fish on this stock at its sub-10 times P/E and 7.4 times forward P/E.
On Mar. 21, the company reported that it, along with its development partner Eisai, ended two late-stage studies for aducanumab. This is a drug candidate for Alzheimer’s. For years, markets pinned its hopes on the drug’s success. The addressable market would be in the billions but now, Biogen does not have an upcoming catalyst in the Alzheimer’s space.
Biogen’s existing pipeline is also worryingly weak. Its ALS drug will face stiff competition and it only has two more drugs for Alzheimer’s in the potential pipeline.
Low P/Es for a Reason
The P/E and forward P/E are both in the single digits for a reason: markets are now re-assessing the future revenue potential from this company. The billions spent on finding a treatment for Alzheimer’s is now partly lost, for now.
Takeaway
Biogen has plenty of cash on hand and at a P/FCF of just seven times, is in deep value territory. Revenue will not grow beyond the single digits, so investors buying the stock will have to hold it for the long-term.
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