What happened 

Shares of large-cap biotech Biogen (NASDAQ:BIIB) gained a healthy 15.2% in July, according to data from S&P Global Market Intelligence. What triggered this breakout? 

Biogen's double-digit move higher last month stemmed from two material events:

  • Biogen and partner Eisai reported encouraging midstage results for the experimental Alzheimer's disease drug BAN2401. Specifically, the two companies reported that patients receiving the highest dose of the drug showed a slower rate of decline than those on placebo after 18 months.
  • Biogen reported that sales of the spinal muscular atrophy drug Spinraza -- co-owned by Ionis Pharmaceuticals (NASDAQ:IONS) -- jumped by a staggering 108% in the second quarter from the same period a year ago.  
Image of a neuron.

Image source: Getty Images.

So what

Biogen has been searching for new growth drivers lately, thanks to the continued declines in its flagship multiple sclerosis franchise resulting from increasing levels of competition. While Spinraza's strong commercial momentum certainly helps on this front, investors are undoubtedly looking toward Biogen's high-value Alzheimer's disease pipeline as the key to future growth. The Alzheimer's disease market, after all, represents a monstrous and largely untapped drug market right now. As such, it's not surprising that investors cheered this fairly unprecedented clinical trial result for BAN2401 last month.  

Now what

The promising results from the preliminary peak of BAN2041's midstage data didn't hold upon further inspection. Later in the month, Biogen and Eisai released additional details on the drug's midstage trial revealing that this putative clinical benefit might be due to little more than an imbalance in the study's design. In short, we'll need to wait until a larger, more comprehensive trial is conduced before being able to draw any solid conclusions.

Meanwhile, Biogen and Ionis' burgeoning SMA franchise could face stiff competition from newer and more potent therapies in the not-so-distant future. That's why investors might want to take a wait-and-see approach with this particular biotech for the moment.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.