Biogen (NASDAQ:BIIB) has been a bust for much of 2019. The stock plunged in March after the company halted two late-stage clinical studies evaluating aducanumab in treating Alzheimer's disease. But that wasn't the end of the story.
The company stunned the biotech world on Tuesday by announcing plans to file for U.S. regulatory approval of aducanumab. Biogen's share price skyrocketed on the news that the Alzheimer's drug was rising from the ashes like the mythological phoenix. Is Biogen now a stock to buy after the biggest biotech bombshell in years?
A bona fide biotech bombshell
Make no mistake about it, Biogen's decision to file for approval of aducanumab definitely is the biggest biotech bombshell in quite a long time. It's important to understand two things about this remarkable story: aducanumab's promise and the seeming finality of the apparent clinical failure earlier this year.
Only two years ago, market researcher EvaluatePharma ranked aducanumab as the No. 1 most valuable pipeline asset in the entire biopharmaceutical industry. Some industry observers predicted that the drug could achieve peak annual sales of close to $20 billion if approved.
Those kinds of accolades pointed to aducanumab potentially becoming one of the most successful drugs in history. And for good reason. Alzheimer's disease is a terrible disease for which effective treatments have been difficult to develop. The landscape is virtually littered with once-promising Alzheimer's drugs that went on to fail.
Earlier in 2019, it seemed that aducanumab was yet another such failure. An independent data monitoring committee advised that the drug wasn't likely to meet the primary endpoints in two late-stage clinical studies. Biogen stopped both studies as well as scrapping a phase 2 study of aducanumab and a long-term extension of a phase 1b study of the drug.
Nearly everyone had given up on aducanumab. What could have been one of the biggest-selling drugs of all time appeared to have been justifiably thrown aside because it didn't work. But Biogen's shocking announcement Tuesday has upended everything.
The biotech said that its decision to submit aducanumab for Food and Drug Administration approval in early 2020 was based on a new analysis of a larger data set from its two late-stage studies that were discontinued earlier this year. Biogen stated that the new analysis showed the drug reduced levels of amyloid in the brain and reduced clinical decline. In the meantime, the company plans to offer aducanumab to eligible patients who were previously enrolled in its studies of the drug.
Biogen's two futures
It's hard to overstate how much aducanumab changes the outlook for Biogen. Without the Alzheimer's disease drug, the company faces some big challenges.
Biogen's multiple sclerosis (MS) franchise has long been its primary growth driver. But sales for its MS drugs are now basically flat as new competition has entered the market. Biogen receives royalties from the most serious new rival, Roche's Ocrevus, but not enough to offset lower sales for its own MS drugs.
With its MS franchise treading water, Biogen has depended on spinal muscular atrophy (SMA) drug Spinraza. Sales for the SMA drug continue to climb but at a slower rate than in the past. The company's biosimilars are generating some growth, although the impact on overall revenue isn't very big.
Biogen's prospects for future growth rely heavily on its pipeline. Excluding aducanumab, the company has five late-stage candidates. One of them, BIIB098, awaits FDA approval. However, even assuming it wins approval, the drug seems likely to take away market share from Biogen's current leading MS drug Tecfidera. None of the biotech's other late-stage candidates have nearly the market potential that aducanumab has.
With the possibility that aducanumab could secure FDA approval, Biogen's future looks much brighter. It would become the first drug to reduce clinical decline for Alzheimer's patients if it's approved. The company would almost certainly have a megablockbuster on its hands that eclipsed the success of any of its other drugs.
Is the stock a buy?
I think that Biogen would absolutely be a stock to buy -- if the likelihood of approval for aducanumab were significant. But is that the case? Probably not.
At least two Wall Street analysts are skeptical. R.W. Baird analyst Brian Skorney wrote to investors that it's "highly unlikely" that aducanumab will go on to win FDA approval. SVB Leerink's Geoffrey Porges expressed reservations about the data that Biogen provided to justify its decision to seek approval for its experimental Alzheimer's disease drug.
I'm personally cheering for Biogen and for aducanumab. I genuinely hope that the drug is effective at reducing clinical decline, wins approval, and ends up helping millions of patients with Alzheimer's disease across the world. But for now, my view is to cheer only from the sidelines. Until there's more clarity on what happens next with aducanumab, I don't think this stock is a buy. There are too many other biotech stocks with better risk-reward propositions.