Is Biogen Getting Ahead of Itself or Ready to Reach New Heights?

Biogen NASDAQ: BIIB surprised analysts and investors when they announced that they would be pursuing a regulatory application from the Food & Drug Administration for their Alzheimer's treatment drug, aducanumab, early in 2020.

The news was a bombshell for the company and the entire biotech industry. Back in March, the drug was widely thought to be destined for failure after it failed in twin late-stage trials.

How did Biogen stock respond?

Initially Biogen stock jumped 28% upon the announcement. This all but reversed the 29% single-day drop Biogen stock absorbed in March when aducanumab appeared to fail. The stock remains down by almost 10% in 2019.

But that wasn’t the only positive coming from Biogen. The company also released its third-quarter earnings. Their earnings per share came in at $9.17 which was well above the consensus estimate of $8.28. The company also beat on revenue coming in at $3.6 billion (vs. $3.5 billion estimated).

The company attributed its strong earnings report in part to the increased sales growth for Spinraza. Biogen reported sales of $547 million for Spinraza which was above the consensus estimate for $516 million. The positive results were encouraging for analysts who have been concerned about the company’s expiring patents that allow competitors to enter the arena. In the case of Spinraza, the company’s spinal muscular atrophy drug, the competition is coming from Novartis’s gene therapy Zolgensma.

So what caused the reversal?

The biotech company said that their decision was based on a new analysis performed on a larger data set from the two late-stage trials that were considered a failure and discontinued. According to Biogen, the new analysis showed two promising results. First, the drug reduced levels of amyloid in the brain. Second, it reduced clinical decline. Based on the new results, Biogen is planning to offer aducanumab to eligible patients who were previously enrolled in its studies of the drug.

New data showed that one of the trials had succeeded. Furthermore, Biogen discovered that patients in the failed trial who received a higher dose of the drug showed similar results to patients in the successful trial.

“We believe that these positive results for aducanumab represent a turning point for patients, caregivers, physicians, and scientists in the fight against Alzheimer’s disease,” said chief medical officer Alfred Sandrock on the conference call following the release of the company’s quarterly earnings.

Why is this drug so significant?

Obviously, Alzheimer’s disease is one of the most perplexing illnesses. And despite more attention - and funding - going into Alzheimer’s research, a cure has been elusive. Two years ago, EvaluatePharma ranked aducanumab as the most single most valuable asset in the entire biopharma industry. There were some industry analysts that projected the drug could reach peak annual sales of nearly $20 billion if approved.

So you can imagine the disappointment when an independent monitoring committee advised that the drug was not likely to meet the primary endpoints in two late-stage clinical studies. The disappointment was magnified because of the hope it was foreshadowing for Alzheimer’s patients. Plus, if the drug was not successful, it was beginning to raise concerns that the years of study regarding how Alzheimer’s disease works – and therefore could be cured – could be wrong.

Is regulatory approval certain?

While optimism abounds, as analysts began to digest the news they cautioned that approval for the new drug was not a sure thing.  The analysts also pointed out that the benefits that Biogen had discovered were slight.

“At first pass, the results still appear to be marginal, with inconsistent treatment effects between the two studies and for different endpoints, but the critical question will be what reassurance the company has received from the FDA,” remarked Geoffrey Porges, an analyst for SVB Leerlink. 

In a separate note, Salim Syed an analyst from Mizhuo remarked, “So the question here is why would two identically designed studies have disparate results,” wrote Syed. “We really need to understand why. This is why the FDA typically requires two trials, to rule out a fluke.”

What should investors do?

The immediate question is will aducanumab receive regulatory approval? Alethia Young an analyst from Cantor Fitzgerald stated that investors were displaying 50-60% confidence for potential approval. That would justify the initial move up. As for the future? If the drug receives approval, there’s no telling how high Biogen’s stock could rise. It’s that big. But in the short term, the drug may settle into another range, albeit higher than where it has been.