Spinraza Worries Spark Bear Note for Biogen

Most analysts are already skeptical of BIIB stock

BofA-Merrill Lynch resumed coverage on Biogen Inc (NASDAQ:BIIB) with an "underperform" rating and a $200 price target -- a more than 12% discount to last night's close. The brokerage firm cited increasing competition for the drugmaker's Spinraza, as well as a high risk/reward pipeline.

Most analysts are already on the sidelines when it comes to Biogen stock, with more than three-quarters of covering brokerages maintaining a "hold" or worse recommendation prior to today. Meanwhile, the average 12-month price target of $253.65 is a tepid 11% premium to current levels.

Options traders, on the other hand, are unusually upbeat toward BIIB shares. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 3.03 ranks in the 92nd percentile of its annual range, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Drilling down, the October 232.50 call has seen a notable rise in open interest over the last 10 days, and data from Trade-Alert points to buy-to-open activity here. If this is the case, call buyers are betting on BIIB stock to bounce back above $232.50 by front-month options expiration at the close tomorrow, Oct. 18.

The last time BIIB closed a week north of here was in late September. Longer term, the shares have been stuck churning below the $235-$245 region since a late-March bear gap. Year-to-date, the pharma stock has surrendered roughly 25%, down 0.2% today at $227.34.