Medicare to restrict coverage of Biogen’s Alzheimer’s drug

Yahoo Finance Live’s Julie Hyman discusses Biogen shares amid news that Medicare will restrict coverage of the pharmaceutical company's Alzheimer’s drug.

Video Transcript

JULIE HYMAN: Finally, I want to take a look at Biogen today. And that's because we have a new development with regards to its Alzheimer's drug, Aduhelm. The stock is not moving much this morning, but it was a pretty significant ruling that Medicare made. It's going to restrict coverage of that Alzheimer's treatment to patients in certain clinical trials. This isn't necessarily that unexpected. The drug has been very controversial.

There's been a lot of talk about whether it's worth its lofty price, whether it's actually effective, but nonetheless, this is yet another boxing in, in the eyes of analysts in terms of the ability for it to make money from this drug that was originally supposed to be a huge one for the likes of Biogen. So it's interesting here.

An analyst at Barclays is the one who uses-- who used that term of boxing it in. He said this largely boxes in Aduhelm, and we expect the company will take additional measures to reduce costs on this front. That was Carter Gould over at Barclays making those comments. So I think the next shoe to drop here is that analysts are going to be looking for Biogen and any kind of developments on other potential blockbusters and things in the pipeline that will be the next thing now that this drug is not necessarily going to be that big money maker for the company, Sozz.

BRIAN SOZZI: Yeah, and you can see in the stock the stock's valuation, Julie. I'm just trolling around on Yahoo Finance Plus right now. It trades at about 14 times forward earnings, the forward market multiple in the S&P 500 about 18 and 1/2 times. So you've seen a big haircut out of this valuation. It makes sense. I think if you are inclined to invest in healthcare and invest in pharmaceuticals, you just look at what Pfizer and Moderna continue to do. I mean, both those companies are trying to change the universe.