Biogen: Don't Give Up On This High Yielder

Seeking AlphaQuick Picks & Lists | Healthcare Biogen: Don't Give Up On This High YielderDec. 10, 2020 10:02 AM ET|| About: Biogen Inc. (BIIB), Includes: GILD, SAGEby: Stone Fox CapitalStone Fox Capital Out Fox The StreetOut Fox the market with misunderstood, high reward opportunitiesSummaryBiogen suffered a disappointing hit from the FDA advisory committee vote on aducanumab.
Then the biopharma announced another $5.0 billion share repurchase plan.
The stock offers an intriguing value based on the net payout yield concept while offering a lottery ticket on the approval of an Alzheimer's drug.
The biopharma sector has a long line of value plays that have repurchased shares to limited immediate value to shareholders. Biogen (BIIB) continues on that path as the stock is at yearly lows despite substantial stock buybacks during 2020. My investment thesis hasn't played out so far due to the failure of aducanumab, but these value plays can take time to gain traction.

Image Source: Biogen website
Elephant in the Room
Back on November 6, the FDA advisory committee voted against the approval of their Alzheimer's diseases candidate aducanumab. The stock soared to a yearly high of $355 on bullish sentiment following the FDA briefing materials despite tons of red flags heading into the advisory committee meeting. The stock is now trading down at only $243 and close to yearly lows.
The Alzheimer's drug saw benefits in the EMERGE trial, but the full data suite including the ENGAGE Phase 3 trial was less than conclusive. The FDA's action date on the application is March 7, 2021.
Source: Biogen Aducanumab Update
The drug data was compelling enough that Boston University Alzheimer’s researcher Andrew Budson proposed a provisional approval as follows:
If I were the FDA, I would provisionally approve the drug for five years, with the condition that Biogen conduct a large phase 4 study within that time. If the new study was positive, the drug... Read more