Can We Beat Alzheimer’s? Biogen and Eisai’s Latest Drug Trial Will Offer Clues.
Biogen is getting one more crack at Alzheimer’s this fall. It’s a critical moment for the company, which recently abandoned plans to sell Aduhelm, another drug targeting the disease, after Medicare effectively refused to pay for it earlier this year.
This fall, Biogen (ticker: BIIB) and its partner Eisai (ESALY) are expected to announce the results of a large trial designed to test whether their latest Alzheimer’s drug, known as lecanemab, can slow the progression of the disease in early-stage patients.
An effective Alzheimer’s treatment would be an extraordinary development for the millions of people living with the condition—and for Biogen and Eisai. The market opportunity for drugs like lecanemab is more than $20 billion in the U.S. alone, according to a July report from Morgan Stanley.
Still, investors have learned a hard lesson from decades of Alzheimer’s failures. Gambling on a positive outcome of an Alzheimer’s trial has proved to be a bad idea, and Biogen’s beaten-down share price suggests that most investors aren’t placing that bet.
In addition to its crucial importance for Biogen, the lecanemab trial is vital for biopharma as a whole: The industry has spent three decades and untold millions chasing an Alzheimer’s theory known as the beta-amyloid hypothesis, on which Aduhelm, lecanemab, and drugs in late-stage development from Eli Lilly (LLY) and Roche Holding (RHHBY) are based.
Today, that theory is battered, if not yet broken. Repeated trials of antibody drugs that clear beta-amyloid plaques from the brain have failed to convincingly demonstrate a clinical benefit. If the lecanemab trial suffers the same fate, it will also dampen hopes for Lilly’s donanemab and Roche’s gantenerumab, both of which are the subjects of Phase 3 trials expected to report results over the next year.
This is all playing out in the shadow of the Food and Drug Administration’s approval of Aduhelm in June 2021, which came despite the vociferous opposition of a panel of FDA advisers. Biogen shares rose nearly 40% after the decision, but then fell steadily as the roadblocks between approval and commercialization became apparent. In April, the federal agency that oversees Medicare effectively refused to pay for Aduhelm, leading Biogen to end its efforts to sell the drug and announce a search for a new CEO.
Biogen shares, which traded around $270 before the approval of Aduhelm and closed at over $400 shortly afterward, are now trading around $205—nearly 40% below their price five years ago. Outside of Alzheimer’s, the picture at Biogen is grim, with sales of key products like the spinal muscular atrophy treatment Spinraza and the multiple-sclerosis drug Tecfidera dropping in the face of new competition.
“They’re in a tough spot if it doesn’t work,” says Phil Nadeau, a biotech analyst who covers the company for Cowen.
In a statement, Biogen’s chief medical officer, Dr. Maha Radhakrishnan, said the company has “always believed that defeating Alzheimer’s disease will require multiple approaches and treatment options” and is looking forward to receiving the results of the trials.
All eyes are on the lecanemab data. Investors will have a high bar for success: Not only will the results need to be good enough to please the FDA, but also the Centers for Medicare and Medicaid Services, to avoid a repeat of Aduhelm.
“It would really have to show a significant variance versus placebo for the Street to get excited, because of the historical context,” says Jared Holz, a healthcare equity strategist at Oppenheimer.
Eisai, which is running the lecanemab trial, hopes the drug will slow progression of symptoms by at least 25% compared with the placebo group, using a rating tool that measures an Alzheimer’s patient’s cognitive function and their ability to do certain daily tasks.
It isn’t clear that investors would view a 25% slowing as a home run. A slowing of more than 35% would be seen as “really striking,” says Nadeau.
Aduhelm, by contrast, showed no cognitive benefit in one Phase 3 trial; it slowed cognitive decline by 22% in a second, though the interpretation of that trial has been controversial.
Nadeau says that compelling results could drive the stock at least into the “high $200s.” Morgan Stanley analyst Matthew Harrison, in a note this month, wrote that clear results showing a 25% slowing could push Biogen stock into the $300 to $350 range. If the trial fails, he sees the shares falling closer to $160 to $180.
A failure would mark a new era for Biogen. Holz says that without lecanemab, conversation would turn to selling off pieces of the company, or pursuing a more aggressive mergers and acquisitions strategy.
Success, on the other hand, would bring a rapid turnabout. Eisai has already asked the FDA for accelerated approval of lecanemab, the same designation the agency gave to Aduhelm. A decision is due in January. If the Phase 3 data are positive, the company will ask for full approval, clearing the way for Medicare coverage.
Given the track record of similar drugs, investors would be well advised to avoid big moves until after the data are out. If the trial is positive, and the beta-amyloid hypothesis is correct, the opportunity is large enough for investors to buy in later. Results from Lilly’s trial next year, and Roche’s later this year, will flesh out the picture of any future market for these drugs and give investors safer opportunities to make their bets.