Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval

The FDA issued an accelerated approval status for Biogen’s new Alzheimer drug with specific requirements related to consumer use and results.  In these cases, the FDA is allowing Biogen to move into a more open consumer trial where the results and side-effects of this new drug will be identified fairly quickly.

This new drug targets the plague in the heart and brain that is associated with Alzheimer’s.  Over five million Americans live with some form of Alzheimer’s currently.  The Alzheimer’s Association continues to provide detailed statistics related to how this disease relates to various segments of American society.  You can read more about how big this announcement is in terms of how Alzheimer’s affects Americans in this 2019 Alzheimer’s Disease Facts And Figures report.

This news of a new Biogen Alzheimer’s drug has sent XBI skyrocketing – yet the news may not be enough to continue to trend across an entire market sector.  The one thing that I would like to point out is that news of a single drug that has entered early-stage accelerated approval by the FDA does not make a new trend – it makes a news blip.

Either way, the long-term results related to the potential success of this new drug may prompt a rally in Biogen and the Biotech sector over the next few months and years. Alzheimer’s is a big problem for many nations across the globe so the potential for this new solution, if priced well, may be huge for Biogen.

The Daily XBI chart below shows a clear downward price channel (CYAN line) that is acting as resistance.  XBI must rally above this level in order to prompt any bigger upside price trend.  As of right now, XBI has rallied up to that level but has stalled near that resistance.  It is likely that the news prompted a big upside trend, however, the reality is that we won’t know how successful this new drug is for Biogen for many months/years.  So, the real opportunity could be a ways away still.

The Weekly XBI chart below highlights recent support near 118.40 (the MAGENTA line) and continues to show the downward sloping resistance channel (the CYAN line).  We believe XBI will have to break out of these price boundaries before it starts any new trends.  Currently, the upside price rally is testing the upper resistance levels.  If it breaks above that level quickly, we may see some bigger upside trending.  If not, it will likely fall back into the range of these boundaries while attempting to find support again.

What does our proprietary BAN strategy say about this new XBI trigger?  Currently, XBI is reporting as BEARISH and is in a RISK OFF trend mode. XBI is also trending/ranking near the bottom of our BAN ETF sector list – meaning that XBI is showing very limited upward trend strength at the moment. This recent news may change that over the next few weeks.  Due to these factors, XBI is not something that BAN would be trading at the moment.

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Have a great day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist


Biogen Shares Soar to All-Time High On Alzheimer’s Drug Approval

Biogen shares soared as much as 64% to a record high on the news that the Cambridge, Massachusetts-based biotechnology company receives approval from the U.S. Food and Drug Administration for Alzheimer’s treatment ADUHELM (Aducanumab).

The U.S. Food and Drug Administration’s decision to approve this treatment will be the first in almost two decades. The food and drugs regulator press release did not talk about any major safety issues, which could help grant ADUHELM a clean label in the future.

Biogen shares surged as much as 64% on the news and finished the day up 38% at a new record high of $395.85 on Monday.

Analyst Comments

“We update our model for Aduhelm approval. We see the investor debate moving to launch speed (including how payers will respond), availability of infusion sites, and post-approval regulatory requirements. Given the limited competition and broad patient need, we expect a robust launch with limited access issues,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“Price target to $455 on approval: We now reflect 100% of our expected revenues (versus 65% prior). We have slightly lowered our penetration as we assume more abandonment/payer pushback given the higher-than-expected price. The lower penetration is more than offset by increasing our assumed net price from $20,000 to $35,000 (the wholesale price is $56,000). We await further details from mgt. on their call tomorrow morning.”

Biogen Stock Price Forecast

Twenty-two analysts who offered stock ratings for Biogen in the last three months forecast the average price in 12 months of $359.06 with a high forecast of $458.00 and a low forecast of $244.00.

The average price target represents a -9.29% decrease from the last price of $395.85. Of those 22 analysts, 11 rated “Buy”, 11 rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $455 from $343 with a high of $694 under a bull scenario and $196 under the worst-case scenario. The firm gave an “Overweight” rating on the biotechnology company’s stock.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $500 from $450. Piper Sandler lifted the target price to $384 from $260. Oppenheimer upped the target price to $450 from $325.

“Today we are upgrading shares to Outperform, and increasing our price target from $225 to $450,” noted Phil Nadeau, equity analyst at Cowen.

“We assume penetration of the 1.5MM mild Alzheimer’s patients will grow to 8% by 2025, yielding $7B in revenue. Our 2025 Non-GAAP EPS estimate has increased from $21.40 to $37.05. We expect revenue to grow to $7B by 2025. We expect Aduhelm’s launch to drive a 13% revenue CAGR for Biogen for the period of 2021-25, among the highest in large-cap biotech.”

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