Shares of Biogen (BIIB) are dropping after two research firms cut the stock to neutral-equivalent ratings. Leerink analyst Geoffrey Porges cited Spinraza's slower than expected start and the completion of several important catalysts as the reasons behind his downgrade, while his peer at Morgan Stanley said he was moving to the sidelines due to limited upside for the stock in the near-term following its recent rally.

SPINRAZA'S SLOW START: In a research note this morning, Leerink's Porges downgraded Biogen to Market Perform from Outperform based on a slower than expected ramp for its spinal muscular atrophy drug Spinraza, and the completion of important catalysts that have evolved over the last few months. The analyst told investors that the "significant catalysts" that he anticipated, namely aducanumab results, Spinraza, and the Bioverativ (BIVV) spinoff, have passed and generated some value for investors. However, the incremental catalysts from here look "relatively limited," he added. Further, Porges argued that what was previously mostly opportunity for the stock has now shifted to risk, with significant competitors approaching for Biogen's Multiple Sclerosis franchise, slower than expected near-term adoption of Spinraza, and at least two more years until results emerge from the company's Alzheimer's disease program. Additionally, the analyst pointed out that he is not particularly positive about the other programs in Biogen's late stage pipeline such as BIIB074, BIIB059, STX100 and opicinumab. The likelihood of "significant M&A interest" in the company also seems diminished given new management appointments, completion of the spin out, some resistance to Spinraza's launch and lower confidence in beta amyloid intervention for Alzheimer's disease, he contended. Porges lowered his price target on Biogen shares to $300 from $305.

LIMITED NEAR-TERM UPSIDE: Also this morning, Morgan Stanley analyst Matthew Harrison downgraded Biogen to Equal Weight from Overweight and lowered his price target on the shares to $305 from $369, saying he sees limited upside for the stock in the near-term. The analyst told investors that this "is not a downside call, but a timing call" as he sees Biogen trading with its peer group after rallying post the Bioverativ spin and on Spinraza excitement. Harrison argued, however, that he believes most investors acknowledge that even if the initial Spinraza revenues are modest given limited infusion sites, the product is likely to ramp well in the second half of 2017. Nonetheless, the sensitivity analysis suggests Spinraza upside may be offset by Roche's (RHHBY) competing Multiple Sclerosis product Ocrevus downside, he pointed out. Additionally, Harrison said he continues to have a positive view of Biogen's Alzheimer's candidate aducanumab, though its data is not due until the second half of 2019.

PRICE ACTION: In morning trading, shares of Biogen dropped 4.4% to $279.80.