Biogen (NASDAQ:BIIB) is facing increased scrutiny as Morgan Stanley downgraded the company's stock rating from Overweight to Equal Weight, citing a slower-than-anticipated launch of its Alzheimer's drug, Leqembi. The financial firm also slashed the price target from $285 to $204, reflecting concerns over the drug's market performance and future revenue potential.
The primary driver behind the downgrade is the underperformance of Leqembi in the market. Morgan Stanley has significantly revised its revenue projections, estimating worldwide sales of $2.4 billion by 2033, a considerable reduction from the previous estimate of $5.6 billion. This adjustment reflects a revised growth forecast of 1% for the period between 2025 and 2030, down from the initial 4%.
Analysts at Morgan Stanley attribute the sluggish launch to initial reimbursement and logistical hurdles. The postponement of the subcutaneous formulation of Leqembi, which offers a more convenient dosing schedule compared to the current intravenous administration, has further compounded these challenges. Regulatory headwinds also play a role, with a negative opinion from the Committee for Medicinal Products for Human Use (CHMP) impacting the drug's prospects in Europe. "We have underestimated the initial reimbursement and logistical headwinds," analysts led by Terence C Flynn noted.
Adding to the competitive pressure, Eli Lilly's Alzheimer's drug, Kisunla, poses a near-term challenge to Leqembi's market share. Despite these challenges, Biogen's management remains optimistic, highlighting ongoing expansion in Leqembi prescribers and early signs of market acceleration in the United States. In Japan, Leqembi's revenue nearly doubled quarter over quarter, indicating some positive momentum in specific markets.
Biogen anticipates regulatory actions for the subcutaneous formulation of Leqembi in mid-2025 and the first quarter of 2026. However, Morgan Stanley sees a low likelihood of approval by the European Medicines Agency (EMA) following the CHMP re-examination expected this year.
Potential Upsides and Downsides
Despite the current headwinds, Morgan Stanley acknowledges potential upside drivers for Biogen shares. These include the Alzheimer's prevention opportunity with the ongoing Leqembi Phase 3 AHEAD-3-45 trial, Phase 2 data for BIIB080 in Alzheimer's, and the progression of Felzartamab into Phase 3 trials.
Conversely, downside risks include stronger competition from Kisunla, potential pipeline failures or delays, and inefficient capital use. The analysts concluded, “While we acknowledge we could be downgrading the stock at/near the bottom, we struggle to see an upside path over the next 12 months.”
