Biogen clocks biggest one-day drop since June on analyst downgrades

Biogen shares led the declines on the S&P 500 on Thursday and are poised for their steepest one-day drop in nine months after analysts at Morgan Stanley and Leerink downgraded the stock.

Shares in the US biotech group finished the day 4.7 per cent lower at $278.96 after analysts at Morgan Stanley lowered their rating on the stock to “equal-weight” from “overweight” and lowered their price target to $305 from $309. Meanwhile, analysts at Leerink cut the stock to “market perform” from “outperform” and lowered the price target to $300 from $305.

That left Biogen with 19 “buy” ratings, 10 “hold” ratings and 1 “sell” rating, according to Bloomberg data.

Leerink’s Geoffrey Porges soured on the stock citing a slower than expected ramp for Spinraza — a first-of-its-kind drug for spinal muscular atrophy, that received regulatory approval in December — and a lack of near-term catalysts to boost the stock. He also lowered Biogen’s revenue forecast for 2017 by 1 per cent and by between “2-3 per cent in later years”.

Mr Porges, said:

What was previously mostly opportunity for Biogen’s stock (trial results, new product launch, takeout potential) has now shifted to risk, with significant competitors approaching for Biogen’s critical (multiple sclerosis) franchise, slower than expected near term adoption of Spinraza, and at least two more years until results emerge from the company’s Alzheimer’s disease program.

The likelihood of significant M&A interest in the company also seems diminished given new management appointments, completion of the spin out, some resistance to Spinraza’s launch and lower confidence in beta amyloid intervention for Alzheimer’s disease.

Meanwhile, Matthew Harrison at Morgan Stanley said the move “is not a downside call, but a timing call”, following a recent advance in the company’s shares after it spun off its hemophilia business, Bioverativ, earlier this year.

He added that Spinraza’s success could be offset by Roche’s competing multiple sclerosis product, Ocrevus, though he did concede that “market share losses to Ocrevus are buffered by a 13.5-24% royalty Biogen receives on US sales”.

Biogen shares are up nearly 7 per cent so far this year after falling 7.4 per cent in 2016.