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DJ Biogen Bet Big on Its Alzheimer's Drug. The Stock -2-

· 02/05/2021 07:01

"The reason we have a regulatory agency is because science is difficult, and we know that the only way we get through to correct answers is being rigorous and empirical," says Dr. Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center.

Once a treatment is approved, it becomes harder to run trials of other, possibly better drugs. And allowing a drug company to reap huge profits from a drug that doesn't actually work warps the incentive structure intended to push companies to discover useful drugs. "I think it would be a great pity to see the drug approved," Bach says.

The FDA is caught in the middle, and it couldn't come at a more delicate time as it seeks to shore up a reputation for rigor and independence that has suffered over the past year.

The Biden administration has yet to name an FDA commissioner; the agency is being led by a longtime senior official, Dr. Janet Woodcock, serving in an acting capacity.

If she is given the top job on a permanent basis, that could be taken as a positive sign for aducanumab. That's because in 2016, in an eerily parallel situation, Woodcock backed the approval of a Duchenne muscular dystrophy drug, despite the opposition of the FDA's advisory committee and opponents within the agency. (Despite the approval, insurers balked at paying for the drug.)

Complicating the picture is Eli Lilly's announcement in January that its drug donanemab slowed decline in early symptomatic Alzheimer's patients by 32%.

The implications for aducanumab are unclear: Some analysts suggest that Lilly's apparent success could ease pressure on the FDA, with the possibility of another therapy backed by better data just a few years down the line. But the success of donanemab, which works on the same general principles as aducanumab, could also help shore up doubts around the science behind the Biogen drug and weigh in favor of approval.

If the FDA does approve aducanumab, analysts predict Biogen shares could soar to around $450. If it is rejected, Jefferies analyst Michael Yee expects the stock to drop to between $180 and $220.

Biogen shares, which trade at 13 times forward earnings, in line with that of major competitors, haven't closed below $200 since 2013.

Even in a best-case scenario for Biogen, uncertainties remain. The megablockbuster sales estimates for aducanumab don't factor in the possible near-term arrival of Lilly's alternative. How deeply that could cut into Biogen's sales depends on how quickly Lilly could get its drug to market.

In a statement, Biogen said it was too early to talk about competition between the drugs. "While we feel that it is premature to speculate on commercial uptake given that neither aducanumab or donanemab are approved products, we welcome innovation in Alzheimer's disease where new treatments are desperately needed," the company says.

The FDA's delay gives investors more time to decide how to play the aducanumab conundrum. Precedent suggests that Biogen will be disappointed, and that the stock will dive. But it's hard to dismiss the signs that something unexpected is in store.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

(END) Dow Jones Newswires

February 05, 2021 07:01 ET (12:01 GMT)

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