The Biogen ripple effect: Analyst recommends Genworth as proxy buy
- According to Steven Schwartz, an analyst at Raymond James, if Biogen's Alzheimer's disease (AD) drug is approved, it could reduce claims at Genworth Financial—and increase profits.
- Schwarts told Bloomberg that about 50% of Genworth's long-term insurance claim payments are for Alzheimer's or other types of dementia.
- Biogen's BIIB037 is a breakthrough drug in that it increased improvement in an early-stage trial of 166 patients.
According to the Alzheimer's Association, in 2015, the cost of AD (and other dementias) on a national level hit $226 billion. In fact, one of three seniors dies with AD or some other type of dementia. Therefore, it should not be surprising that a company, such as Genworth, which provides long-term care insurance to a senior population has been negatively affected by much higher-than-expected costs, including the cost of around-the-clock nursing and home health aide care.
As a result, Genworth's stock, which has a 52-week trading range of $6.75 to $18.74, is currently trading at $6.83—just off its low. However, Raymond James analyst Steven Schwartz has a $12 target price for the stock—assuming, of course, that BIIB037 makes it through the R&D process.