Wolfe Research upgraded two prominent pharmaceutical companies to Outperform on August 13. The firm upgraded both Biogen Inc. (NASDAQ:BIIB) and AbbVie Inc. (NYSE:ABBV)’s ratings from Peer Perform, with Wolfe assigning them similar $300 price targets. The firm’s logic in each case was based on a comparable set of factors: pipelines that the market appears to undervalue, and valuations that Wolfe believes are too low given each company’s growth track.
Biogen: Pipeline Catalysts and M&A
Wolfe’s thesis for Biogen Inc. is mainly based on late-stage clinical programs, which it believes the stock has yet to reflect. The firm focused on two experimental therapies in particular, both of which have key late-stage clinical readouts expected over the coming year: litifilimab, which Wolfe believes could be the first biologic approved for cutaneous lupus erythematosus, and felzartamab, which the firm claims represents a bigger commercial opportunity in antibody-mediated transplant rejection than Wall Street currently thinks.
Wolfe also cited Biogen’s acquisition of Apellis Pharmaceuticals as strengthening its near-term revenue base through the FDA-approved drugs Empaveli and Syfovre. That move is part of an overall pattern of Biogen Inc. diversifying beyond its core neurology brand, with the company completing its acquisition of RayThera on August 6, adding another early-stage immunology platform to its pipeline.
Wolfe’s Biogen Inc. thesis is incomplete without valuation. The firm believes the stock is trading at a discount to the broader market, despite the company’s development on Leqembi, its Alzheimer’s medication, and what Wolfe described as solid commercial execution overall.
AbbVie: Patent Strength and Cash Generation
AbbVie’s upgrade is based on a slightly different premise: patent strength and cash generation rather than simple clinical events. Wolfe stated that AbbVie’s 2027 earnings multiple of 14.6x seemed too low for a company that forecasts high-single-digit revenue growth for the rest of the decade. AbbVie’s patent position, according to Wolfe, sets the company apart from its competitors in a way that the market has yet to completely price in.
Wolfe pointed out that the expected generic entry date for Rinvoq, one of AbbVie’s key immunology drugs, has been pushed back to 2037, while the company continues to defend the patent securing Skyrizi, its other major immunology brand, and the drug most responsible for making up for the long decline in Humira sales since that medication lost patent exclusivity.
Hedge Fund Positioning
Hedge fund positioning shifted in opposite directions for the two names. Biogen’s ownership fell from 64 funds in the first quarter to 59 in the second quarter, a modest decline ahead of Wolfe’s upgrade, showing that hedge fund participation had weakened slightly despite the company’s expanding pipeline and M&A activity. AbbVie Inc., on the other hand, saw hedge fund ownership slightly increase from 87 to 88 funds during the same period, indicating stable hedge fund investor participation.
The Bull Case
The case for Biogen Inc. is based on multiple catalysts arriving in a short window, with litifilimab and felzartamab both having the potential for first-in-class or larger-than-expected commercial results, while recent M&A in Apellis and RayThera expands the company beyond its legacy neurology exposure and reduces dependence on any one franchise. For AbbVie Inc., the case is less about a single event and more about longevity. A patent runway on Rinvoq extended to 2037, as well as continuing defense of Skyrizi’s patent protection, could provide the company with a longer period of exclusivity than its 14.6x 2027 earnings multiple appears to reflect.
The Bear Case
The flip side to Biogen’s catalyst-rich pipeline is risk: litifilimab and felzartamab are still waiting for clinical results, and a disappointing result on either could undermine Wolfe’s argument for the upgrade, while recent acquisitions like Apellis and RayThera still carry integration risk until their contributions are fully proven. The concern for AbbVie Inc. is that its valuation case still depends on both durable patent protection and successful execution across an increasingly broad pipeline. If Rinvoq or Skyrizi patent protection is overcome earlier than expected, the company would face a repeat of the patent-cliff scenario that devastated Humira.
Insider Monkey’s Verdict
Both upgrades reflect Wolfe’s belief that the market has been overly conservative on pharmaceutical valuations, though the core risk profiles differ. Biogen offers more upside connected to certain clinical and M&A catalysts over the next year, making it a stock to keep an eye on as litifilimab and felzartamab data readouts come in. AbbVie’s case is more stable and less event-driven, relying on patent longevity, making it perhaps the lower-risk method to act on Wolfe’s overall thesis that quality pharmaceutical names are undervalued.
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