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Biogen Targets MS and RA
05/13/2005 12:00 am EST
One of the most impressive aspects of The Medical Technology Stock Letter is how editor John McCamant addresses the biotechnology arena in a way that allows investors to learn the medical and financial reasoning behind his stock picks. Here, he looks at Biogen.
"Biogen Idec (BIIB NASDAQ) recently sold off due to safety concerns
over its MS drug, Tysabri, which we do not expect to return to the market soon.
Nevertheless, the price drop has brought BIIB back to an attractive level for
both short and long-term investors. We recommend the stock primarily for the
significant growth opportunity its Rituxan drug brings to the plate in treating
autoimmune disease, most importantly rheumatoid arthritis (RA). We would even go
so far as to say that Rituxan and its novel mechanism of action (B cell
depletion) represents a paradigm shift in how we look at and treat autoimmune
disease. Wall Street’s main concern with BIIB is the lack of a growth driver
after Tysabri. Our analysis leads us to believe that Rituxan sales for the
treatment of autoimmune disease will be a growth driver for the company.
"The treatment of RA has been a disease sector in which biotech companies have done an excellent job of delivering new drugs, with four biologics currently on the market. These drugs have made a huge difference in the lives of RA patients, yet here remains a significant opportunity for new treatments. We are recommending BIIB primarily for the Rituxan growth opportunity in RA. We also expect Rituxan to work in Lupus and believe it has a reasonable chance for success in the treatment of MS as well. BIIB is trading near its 52-week low after the Tysabri debacle, and Wall Street’s conservative estimates of Rituxan in RA have done little to help the stock price. Thus, we believe that BIIB is a good investment at current levels and represents the best opportunity to participate in the growing RA market. We are recommending BIIB as a buy under $38 with a 24-month target price of $57."
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