Biogen Idec Inc (NASDAQ:BIIB) stock surged almost 10% in last trading session on news that its Alzheimer’s drug candidate exceeded expectations in an early test. At a time when its stock prices are trading close to 52-week high, experts are divided on their views as to if there is more value left in Biogen’s stock.
One of the biotech investors said that it has increasingly become difficult to find value in biotech stocks. iShares Nasdaq Biotechnology ETF has already surged over 20% in this year. The ETF tracks performance of pharmaceutical and biotech companies on the NASDAQ platform. However, Les Funtleyder of E Squared Asset Management believes that good results and good drugs will ultimately drive value as the biotech sector progresses.
Expressing views on Biotech valuations, Yaron Werber of Citi Investment Research, said that Biogen’s stock can gain further in the coming week. It would take years to introduce Alzheimer’s drug in the market and therefore, it is essential to focus on long-term prospects of the company. Both Werber and Funtleyder stated that biotech firms like Biogen who develop drugs in multiple diseases areas can sustain their valuations in the long run.
When analyzing the valuations, it is also essential to take into account the low interest rates that support risk assets. The biotech sector has surged in the low interest rate environment in last few years.
The Alzheimer drug candidate of Biogen named as aducanumab or BIIB037 resulted in lower levels of the amyloid plaques in the brain. These are said to be the main cause behind Alzheimer. The medication supports cognitive declines in patient suffering from Alzheimer.
Measured on Clinical Dementia Rating, aducanumab showed a 71% reduction in mental declines on the highest dose, much above the analysts’ expectations of 20% to 30% reductions. Clinical Dementia Rating is one of the key measures of cognition.