Dear Followers&Copiers, In this post I run a SIAScore update for $BIIB, which “is a biopharmaceutical company. The Company focuses on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. The Company markets products, including TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). It also has a collaboration agreement with Genentech, Inc. (Genentech), a member of the Roche Group, with respect to RITUXAN for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other anti-CD20 therapies. The Company’s product candidate includes OCREVUS; Biosimilar adalimumab; Aducanumab; E2609; BIIB074; BAN2401; Opicinumab; CIRARA; BIIB061; BIIB054; BIIB067, and BIIB068.” (CNBC)
Another Financial Year (FY) has passed and it’s time to update the equity portfolio of the Global Leaders Portfolio (GLP) in terms of the SIAScore we use. $BIIB is one of our portfolio names. Let’s quickly remind what SIAScore is and how the process :
S1: growing sector 1pts/0pts,
S2: incumbent or prospective global leader 1pts/0pts,
S3: growing or stable wide margins (40%+ gross; 3yr avg) 2pts/0pts,
S4: Net Debt/EBITDA <1.5 (last 3 ended FYs) 2pts/0pts,
S5: above-average cash flows (FCF/MktCap (last 3 ended FYs) > S&P500 Dividend Yield or US 10yr Treasry Yield (higher of the values)) 2pts/0pts;
MAX TOTAL SCORE: 8pts/MIN TOTAL SCORE: 0pts/MIN SCORE TO QUALIFY: 4pts
Let’s analyse each step now…
S1: 1 point $BIIB operates in a growing sector with high potential. No doubt. Pharma is one of the sectors that have bright future ahead.
S2: 0 points Although the company is big, especially in US, it cannot be deemed incumbent or prospective global leader of its industry. Hence no points given here.
S3: 2 points
2018——2019——-2020——-AVG——-last yr AVG
86,5%….. 86,4%…….86,6%…….86,5%…….86,5%
Wide Gross Profit Margin (GPM) and stable tendencies. The company has very good pricing power for its high-value-added products.
S4: 2 points
2018——2019——-2020——-AVG——-last yr AVG
0,14……..0,07…….0,87………..0,36…………0,03
$BIIB‘s net debt position has been growing in recent years. This tendency must be watched. Still there’s a lot of space until it’s 3yr avg reached uar 1,5 upper limit.
S5: 2 points
2018——2019——-2020——-AVG——-last yr AVG
9,13%……12,7%……9,4%…….10,4%………9,1%
The avg 3yr FCF yield is way above the minimum treshold level, which is currently at higher of the two: the $SPX500 dividend yield (1,53%) and the 10Y treasury note yield (1,7%). The company still generates great FCF, which is the biggest shareholder value producer in the long run.
Aggregate scroe for $BIIB: 7 points (stable YoY).
Conclusion: Fundamentals of $BIIB are sound. Debt levels must be watched going forward, especially in the light of recent falling sales dynamics f’casts caused by the growing generic competition of $BIIB‘s drugs (one of biggest risks to the stock). On the upside there’s Aducanumab (potentially 1st Alzheimer drug in the world) – although it has its tough days with the FDA, if eventually nodded by the authority, it will be the a big game changer. Valuation-wise it trades at a very low 11x TTM PE, with the avg for the $SPX500 Shiller CAPE of 36,6x. Additionally its 1yr forward PE stands at 13x, which can be deemed really cheap. Technically the stock has been in a USD250-350 range for quite some time now. Horizontal trends don’t last forever. Upside risks are bigger than downside risks in my view. Avg analyst’s 12-month target price for the stock is USD307,4.
Best regards, GlobalAlphaS
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