Biogen (BIIB) Has Amazing Potential

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The number of Americans ages 65 and older will more than double over the next 40 years, reaching 80 million in 2040, according to a study from the Urban Institute.

That should be bullish news in the healthcare space that focuses on delivering treatments to an older population.

One of those firms is Biogen (BIIB), which is a global leader in neuroscience development and treatment.

While it’s not the largest drug manufacturer out there, nor the most popular search amongst financial pros, we found a lot of good reasons to own this stock.

Check out our analysis below…

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Biogen’s Business

Biogen (BIIB) is a biotech company offering medical solutions to people who are suffering from neurological diseases and related therapeutic adjacencies.

The firm has an impressive collection of medicines to treat multiple sclerosis, spinal muscular atrophy, plaque psoriasis, Alzheimer’s disease, non-Hodgkin’s lymphoma, rheumatoid arthritis, Parkinson’s disease, depression, and neuromuscular disorders, to name a few. 

In 2021, BIIB generated revenue of $7.1 billion from its multiple sclerosis treatments. Last year it generated revenues of $1.9 billion from its spinal muscular atrophy treatment, SPINRAZA, which has over 11k patients on the therapy. 

In addition, it made $831 million in revenues in 2021 from biosimilars, with over 251k patients on board.

Here’s an in-depth product breakdown from the firm’s Q1 2022 release:

Financials

BIIB has seen a slide in revenues from its 2020 highs. Which is not something you want to see as a prospective investor.

However, the firm believes it can get back on track by rolling out new therapies and treatments over the next five to ten years.

The company has plenty of cash on hand, as it generates $3.03 billion in net operating cash flow.

The firm has total debt of $7.59 billion, cash of $3.75 billion, and a market cap north of $31.26 billion. 

Furthermore, BIIB has a current ratio of 2.01x. In other words, it has enough liquid assets to cover its short-term liabilities.

 Valuation

Often times biotech stocks will trade at insane multiples. However, that isn’t the case with BIIB. In fact, at a P/E ratio of 21.96x, it is significantly better than the sector median of 27.44x.

Its price-to-sales ratio of 2.93x, which is head and shoulders better than the sector median of 4.65x. Typically, the lower the price-to-sales ratio, the better. It shows the company is generating more revenue for every dollar investors have put into the company.

One thing is clear. And that’s how BIIB knows how to make money. The firm has a gross profit margin of 77.95%, the sector median is 55%.

But that’s not all.

It has an EBIT margin of 28.64% vs. the sector median of 1.27%. And an EBITDA margin of 33.52%, which is wild when you consider the sector median is a measly 4.28%

And of course, we’ve already mentioned the more than $3 billion cash it generates from operations.

While the profit numbers are outstanding, there are concerns with growth.

Revenues (YoY) decreased by 14%. And its EBITDA growth (YoY) and EPS growth (YoY) were both negative.

While that does look disappointing, the firm has several new treatments and therapies in the pipeline to help improve those growth numbers.

Our Opinion – 8/10

Whether the economy is booming or in a recession, people will get sick, and they’ll need treatment.

BIIB is one of the oldest publicly traded biotech companies, which now employs nearly 10K people. This company isn’t going anywhere, as it is a leader in neuroscience.

The company has a strong balance sheet and is trading more than 40% from its 52-week highs.

We like it here, and for the next 12 to 24 months.