Biogen’s Resurrection

Biotech, pharmaceuticals

If there is one topic that scientists disagree strongly about in the field of medicine, it is the so-called amyloid hypothesis. This theory, believed by many scientists, holds that the protein amyloid-β accumulates into toxic deposits as Alzheimer’s disease progresses, ultimately causing dementia.

However, others think that amyloid is associated with the problem, but it isn’t the problem. The doubters point to a very detrimental second protein called tau. This protein also deposits in the brains of people who have Alzheimer’s, and it is actually the one that more strongly correlates with cognitive decline.

However, if the amyloid hypothesis does hold up, one company stands to benefit greatly…

Lecanemab and Alzheimer’s

That company is Biogen (BIIB), and it’s all thanks to recent clinical trial results.

Developed by Biogen and Japan’s Eisai (ESALY), lecanemab is a monoclonal antibody designed to clear clumps of amyloid protein from the brain.

The companies conducted a Phase III trial, Clarity AD, which ran for 18 months and covered 1800 patients in more than a dozen countries. According to data released on September 27, the drug candidate slowed the rate of cognitive decline by 27%; however, only a limited amount of data has been made available so far, and scientists are awaiting the full analysis results before proclaiming lecanemab a miracle drug.

Still—for a disease with virtually no effective treatment measures, that 27% is a significant figure.

At the moment, all doctors can offer Alzheimer’s patients are medications that alleviate some of the symptoms. Patients in the early stages of the disease might be given drugs to increase the levels of a brain chemical called acetylcholine, which helps nerve cells communicate. Also, psychiatric medications are sometimes prescribed to manage the behavioral and psychological symptoms that arise as Alzheimer’s advances.

The question remains whether the benefit lecanemab brings is worth the risks. During the trial, about 20% of participants who received lecanemab showed abnormalities on their brain scans that indicated swelling or bleeding, although fewer than 3% of those in the treatment group experienced symptoms of these side effects.

The FDA is reviewing lecanemab for ‘accelerated approval’ on the basis of Phase II results that showed a decrease in amyloid. The new Phase III results could tip the scales in favor of approval, although the trial is not formally part of the review. The agency expects to announce its decision on January 6, 2023.

Biogen Needs an Approval

Biogen needs the FDA approval on lecanemab badly.

Last year, its predecessor, aducanumab, was a flop. It was also designed to target amyloid plaque in the brain, but it wasn’t clear that the drug meaningfully slowed the rate of cognitive decline in clinical trial participants. In addition to the questions over aducanumab’s efficacy, there were concerns about its safety after roughly 40% of clinical trial participants developed brain swelling and bleeding.

Despite this, aducanumab received approval from the FDA, setting off an outcry. The Department of Health and Human Services, which oversees Medicare, decided to restrict the use of aducanumab to only patients enrolled in clinical trials. So, in effect, the drug’s rollout was over before it began.

Biogen’s share price suffered as a result, plunging from around $400 per share to a bit below $200. Shareholders have been hoping good trial results for lecanemab will turn the company’s fortunes around. For the company itself, lecanemab would be a game changer.

There’s no denying that many uncertainties remain around lecanemab. But Wall Street will be able to form a fuller opinion once the trial’s data is presented at the Clinical Trials on Alzheimer’s Disease (CTAD) conference in late November.

Then the drug will need to be approved for reimbursement by the Centers for Medicare and Medicaid Services (CMS), the same body that restricted the use of aducanumab to clinical trials. Both the conference and the CMS verdict have the potential to move Biogen’s share price in a big way.

But if all goes well, the reward could be huge.

Biogen’s Potential

With nearly six million Alzheimer’s patients in the U.S. today—and no effective method of slowing the disease’s progression—demand for lecanemab will likely be significant. Evaluate Pharma, a pharmaceutical industry intelligence provider, has estimated that the market for Alzheimer’s drugs will exceed $12 billion before the end of the decade.

Biogen’s portfolio of drugs is far less diversified across diseases than many rival biotechs and has fewer patented products as well. However, Biogen has the distinct advantage of a clearly defined specialty: neurological illnesses. Many of the diseases it seeks to treat, from multiple sclerosis to motor neuron disease, have few, if any, effective treatments available currently. This specialization serves as a kind of economic moat, or competitive advantage, for the company.

And Biogen remains much cheaper than its peers. FactSet places the company’s price-to-earnings multiple at 15.6 times for the full financial year—significantly below the 37.6 times average of its biotech peers.

Obviously, much will depend on government regulators and the release of full trial data for lecanemab. Nevertheless, there is plenty to be optimistic about with Biogen, making it a speculative buy.

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