Biogen (NASDAQ:BIIB) shocked investors last year when it said it would submit its investigational Alzheimer's drug to the Food and Drug Administration for approval -- months after halting studies that showed the drug didn't work.

The biotech company explained its decision to file in early 2020 for regulatory approval, saying a look at broader data renewed its belief in aducanumab. The drug acts by binding to and eliminating beta amyloid, a protein that clings to neurons in the brains of Alzheimer's patients.

Three scientists examine data in a laboratory.

IMAGE SOURCE: GETTY IMAGES.

Biogen said the earlier data, which didn't meet endpoints and resulted in halting trials, involved giving the drug at lower doses. In patients with a gene variant that increases a side effect risk, researchers started with lower doses, then later increased them when it was deemed safe to do so.

Therefore, that study, called Engage, had fewer participants getting high doses for the full treatment period compared with Emerge, the second study. In Emerge, the high dose of aducanumab reduced clinical decline, while in Engage, only the subset of patients given high doses showed the same result.

Though this newer data left doubts among some scientists and investors, there are two reasons to be optimistic about a possible FDA approval.

1. The FDA has been approving more and more drugs

In 2019, the FDA approved 48 novel drugs. While down from the total of 59 approved in 2018, it still is well above the 10-year average of about 38.

The number of approvals has more than doubled since 2010, and with the exception of a couple of dips, the approval numbers have been on an upward trajectory for most of the decade.

Why is the FDA approving so many drugs? The answer to that question leads us to the second reason to be optimistic about Biogen's aducanumab.

2. The Alzheimer's drug is a treatment for an unmet need

The FDA faces the dilemma of whether to approve a much-needed drug based on weaker data due to market need, or wait until clinical outcomes are met.

Often, the FDA bases a decision on "surrogate" endpoints, which measure quicker-to-establish elements like tumor shrinkage in the case of cancer drugs, rather than clinical outcomes like survival or disease-free status.

Clinical outcomes take more time to meet, which has the result of denying an entire patient population access to a drug that could be life-changing or lifesaving. "The FDA has increasingly accepted less data and more surrogate measures, and has shortened its review times," according to a recent paper in The Journal of the American Medical Association.

Biogen's aducanumab, if approved, would be the first drug on the market to reduce clinical decline in Alzheimer's disease.

According to the Alzheimer's Association, 5.8 million Americans are living with the disease. In trials, the Biogen drug showed benefits in areas of memory, orientation, language, and daily activities.

But some analysts and physicians argue that the data falls short of meeting the FDA's requirement of "substantial evidence" of effectiveness.

Evaluate's Vantage 2020 report, which says the FDA's accommodating position on approvals is likely to last, predicts the aducanumab decision could confirm exactly how flexible the FDA will continue to be in future cases.

The Vantage report said a nod from regulators might be seen as "a Sarepta (NASDAQ:SRPT) 2.0 and a further demise in standards of evidenced-based medicine." The FDA drew criticism in 2016 when it approved Exondys 51, Sarepta's first drug for Duchenne muscular dystrophy, even though an advisory committee said the drug didn't provide enough proof of efficacy.

The example of Sarepta's drug isn't alone. Last year, the FDA approved Karyopharm Therapeutics's (NASDAQ:KPTI) Xpovio for multiple myeloma even though the advisory committee favored waiting for further trial data and recommended postponing an approval. In these cases, as in the case of Biogen's Alzheimer's drug, patients' treatment options are limited -- and an FDA refusal could draw ire from patient groups.

What does this mean for investors?

The FDA's decisions and flexibility are indeed reasons to be optimistic about aducanumab, but it still is too early for Biogen and its investors to proclaim victory.

Once Biogen submits aducanumab to the FDA, investors should be on the lookout for the advisory committee's opinion. Though, the FDA doesn't always follow the direction of this panel of experts, the regulatory agency does seriously consider its opinion. A positive opinion from the panel is likely to boost Biogen shares and mitigate the risk of buying the stock.

Conversely, a negative message from the panel is likely to weigh on the shares and shake investor confidence. For the long-term investor, Biogen's pipeline makes it a valuable investment, but in the coming months, the aducanumab story may translate into some ups and downs for the shares.