Why Biogen Lost $2.4 Billion in Two Hours on Monday
January 5, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Like a lot of companies, Cambridge, Mass.-based Biogen took a hit yesterday as stocks dropped overall. In the first two hours of trading yesterday, Biogen lost about $2.4 billion in value with a 3.6 percent stock drop.
Was there something special about Biogen’s drop? Don Seiffert with the Boston Business Journal primarily notes that the biotech industry seemed to take a bigger hit than the overall S&P 500 Index. The S&P 500 was down 2.6 percent, and life science companies dropped about 3.4 percent.
He points out that other companies hard hit included Voyager Therapeutics, down 8.1 percent, Infinity Pharmaceuticals , down 10.6 percent, Flexion Therapeutics , down 7.1 percent, Proteon Therapeutics down 7.2 percent, and Synta Pharmaceuticals , down 8.8 percent.
Even megacompany Shire Pharmaceuticals was down 4.3 percent for a loss of about $1.7 billion.
The overall drop in the stock market appears to be directly connected to the Chinese market, as well as tension between Iran and Saudi Arabia. These, according to MarketWatch, “sparked a global equity selloff.”
The S&P 500 SPX fell 31.28 points. “It is not surprising to see such a selloff considering negative headlines from China and tensions between Iran and Saudi Arabia,” Ryan Larson, head of equity trading at RBC Global Asset Management, told MarketWatch. “What is surprising is that it is happening on the first day of the year. While trading desks are busier than they normally would be on Mondays, this is not a panic selling, it’s orderly. We are likely to see this kind of volatility a lot in 2016.”
In terms of China, the country’s Shanghai Composite Index slid almost 7 percent and trading was halted on the mainland for the rest of the day, with European stocks also falling. “It’s unclear if the rout in China is more of a function of overvalued markets there or a deteriorating economy,” Tower Bridge Advisors president Maris Ogg told MarketWatch.
“We believe China’s economy is growing at a much more modest 2 to 4 percent range, not the 7 percent officials in China say. But that is not news to most investors. However, trading halts and market plunges did spook global investors.”
Biogen , however, has been very volatile over the last year anyway. Shares spiked on March 20, 2015 to $475.98, dropped dramatically on July 24 to $300.03, and continued downward to $256.04 on Oct. 13. Shares were recovering slightly, hitting $309.67 on Dec. 29. After yesterday’s drop they are currently trading for $296.69.
There have been hints that Biogen plans to raise prices for its multiple sclerosis (MS) drugs, which overall has given the company stock a shot in the arm. Eric Schmidt, an analyst with Cowen & Co., reiterated an “outperform” rating yesterday, with a $368 price target.
“Third party sources indicate Biogen enacted a 4 percent price hike on Tecfidera, Avonex, and Plegridy and a 5 percent price hike on Tysabri,” Schmidt told Benzinga. “While the magnitude of MS drug price increases may be lower than normal during an election year, we continue to view U.S. pricing in the MS marketplace as flexible, and the main driver of growth for Biogen’s franchise.”
He concluded by saying that he thought investors in Biogen “will be rewarded for their patience.”