January 2nd, 2015

BIIB’s Second Act

imageAre you one of those who missed the biotech burst, especially the 375% run-up from a leader like BIIB (Biogen-Idec) since its breakout on March 11, 2011?  You can’t make up the “opportunity costs” of not having bought but you have an opportunity in what may be left in the stock’s upside move by jumping on the stock as it looks to complete a easily identified year-long consolidation in the form of an ascending triangle, the first since beginning its run almost four years ago (to enlarge, click on image below).

Biogen Idec Inc. discovers, develops, manufactures and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders with such products as AVONEX, TYSABRI, FAMPYRA, FUMADERM and RITUXAN.  One of the reasons for the pause in BIIB’s upward trajectory was the uncertainties surrounding the company’s prospects as it faced expiration of its AVONEX patent at the end of 2013.  Articles like this one from May 2013 entitled “3 Bio Companies Facing The Patent Cliff” didn’t help.

But companies of BIIB’s caliber don’t just roll over when they face a challenge like major patent expirations.  It takes a while for them to regroup and for investors to regain their confidence,  Hence a consolidation in the form of an ascending triangle.  Apparently, the consensus among the majority of the stock’s investors is that BIIB has successfully weathered the storm with sufficient existing products and products in the pipeline that growth can be expected to resume.  Hence, a likely breakout from the consolidation pattern.

Some investors balk at buying and owning stocks with triple-digit price tags because of the fear of less volatility and more limited upside (BIIB is the 10th highest priced stock among the S&P 500 behind such leaders as NFLX (Netflix), ISRG (Intuitive Surgical), PLCN (Priceline) and CMG (Chipotle Mexican Grill).  But those concerns should be alleviated by knowing that BIIB ranks 71th among the S&P 500 stocks in 5-year average annual earnings growth of nearly 25%.

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