The FDA approved Biogen’s Alzheimer’s drug Aduhelm earlier this week
The shares of Biogen Inc (NASDAQ: BIIB) are up 1.5% to $ 421 this morning after a series of bullish analysts ‘additions, including a sharp increase in JP Morgan Securities’ target price to $ 435 from $ 269 and an upgrade of UBS to ” Buy “and upgrade from Amber To Beat.” Both brokers expect the Food and Drug Administration (FDA) approval of Biogen’s Alzheimer’s drug Aduhelm to boost sales this week.
The new drug was the subject of controversy this week, with a third member of a key FDA panel resigning for approval last night, calling it “one of the worst drug approval decisions in recent US history” in a letter of resignation. The treatment also comes at a high cost. Biogen listed the treatment at $ 56,000 a year – much higher than the $ 10,000-25,000 price point that several analysts had expected – but promised not to raise the price for four years.
In the maelstrom of drug news, BIIB has taken some incredibly oversized steps. The stock rose 38% on Monday, hit a record high of $ 468.55, and has continued to rise for most of the week. If today’s earnings hold, the stock could be heading for its biggest weekly percentage rise ever.
Today’s round of bull grades may just be the beginning for Biogen. The stock’s 12-month consensus target of $ 390.49 is a 7% discount from last night’s closing price. Also, as of the start of the day, nine viewed BIIB as a “buy” or better, compared to 16 who named it a “hold”.
The option pits were also a little more bearish than usual. On the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX), the BIIB has a 50-day put / call volume ratio of 1.19, which is more than 90% of the reading in their annual range. Additionally, the security’s put / call open interest ratio (SOIR) of 1.27 is in the 91st percentile of its annual range, meaning that short-term option traders were more put than normal.
Despite all of this volatility, BIIB options can still be purchased at a low cost. This emerges from the Schaeffer’s Volatility Index (SVI) of the share of 43%, which is higher than only 11% of the measured values of the last 12 months. This means that options traders are currently pricing in relatively low volatility expectations for the stock.