Why Biotech Stocks Rallied on Biogen's Alzheimer's Test

Several major biotech stocks rallied on Friday after Biogen BIIB reported positive results from a Phase 2 study of its Ban2401 therapy, which seeks to reduce toxic amyloid proteins associated with cognitive decline and Alzheimer’s disease.

Shares of Biogen were up more than 17% through afternoon trading hours Thursday. Japan’s Eisai Co. ESALY, a partner in the Ban2401 development, saw gains of nearly 20%. This momentum was enough to lift the rest of the biotech space, evidenced by the iShares Nasdaq Biotechnology Index Fund IBB adding about 3.2%.

Biotech giants like Biogen, Celgene CELG, Amgen AMGN, and Gilead GILD have all underperformed the broader Nasdaq index over the past year, and the industry likely needed positive news to spark some optimistic trading.

Speaking to The Street’s “Real Money” column, Atlantic Equities analyst Steve Chesney said that investors might finally be noticing the value of R&D efforts from these companies.

“This is all about believing innovation and when a company like Biogen comes and reports positive clinical results for a disease like Alzehimer's the implied probability for success for the rest of the industry's pipeline moves a little bit higher,” Chesney told The Street.

Celgene shares added about 2.3% to touch an intraday and one-month high of $82.34. Meanwhile, Amgen moved about 2% higher, and Gilead gained more than 3.3%.

Biogen’s latest test included 856 patients with early Alzheimer’s disease. The company shared positive results from this group over a period of 18 months. Nevertheless, the trial is still only in Phase 2, and the challenges of Phase 3 and its additional regulatory hurdles are still looming.

Still, Biogen will hope that it can commercialize Ban2401 in a timely manner. A new product would likely inspire positive analyst sentiment and lift growth prospects for the coming years.

Within the past two months, the Zacks Consensus Estimate for Biogen’s 2018 earnings has dropped from $23.90 per share to $23.85 per share. This would mark year-over-year growth of 9.4%.

Early estimates for 2019 have the company’s earnings pegged at $26.19 per share, which would represent a 9.8% increase from this year’s projected totals.

BIIB is currently sporting a Zacks Rank #3 (Hold). Its “Medical – Biomedical and Genetics” industry is sitting in the bottom 38% of the Zacks Industry Rank.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ISHARES NDQ BIO (IBB): ETF Research Reports
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
Celgene Corporation (CELG) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
Biogen Inc. (BIIB) : Free Stock Analysis Report
 
Eisai Co. (ESALY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research