Biogen (BIIB -2.70%) is facing its biggest moment ever. The U.S. Food and Drug Administration (FDA) will soon decide the fate of the company's investigational Alzheimer's drug. Investors and analysts consider the approval of aducanumab as critical to Biogen's future growth. Why? Because generic competition is eroding Biogen's billion-dollar multiple sclerosis business.

The biotech giant needs a new blockbuster product. And aducanumab -- if approved -- would surely be it. More than 5 million Americans suffer from Alzheimer's, according to The Alzheimer's Association. Now you might say: Well, if clinical trial results were positive, aducanumab has a good shot at approval, right? The problem is that the data haven't convinced everyone -- including an FDA advisory committee.

Hand holding blocks spelling FDA

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A vote against

The advisory panel, which convened in November to examine aducanumab's application, voted against approving the drug candidate. The FDA isn't obliged to follow the committee's advice -- but it does take it into serious consideration. According to a McKinsey & Co. study, the FDA hasn't approved 86% of candidates that committees voted down.

So, after that meeting, why are we still feeling like aducanumab may have a chance? The FDA, in a surprise move last month, extended its review period for the investigational drug by three months. It now must issue a decision by June 7.

Investors speculated that, if the FDA was sure about following the panel's advice, it wouldn't have lengthened the review period. That may be true -- but it doesn't mean the outcome will be positive. The agency may just need more time to consider all of the data.

Here's why aducanumab has created so much controversy. In March 2019, Biogen ended the development program, saying the treatment didn't work. Biogen had conducted two phase 3 trials, named "Emerge" and "Engage." The former met the primary endpoint of showing a reduction in clinical decline (measured by cognition and daily function). The latter study did not.

A broader set of results

Then, about six months later, Biogen said a broader set of results showed the drug candidate did work. At that point, the company said it would request regulatory approval. "Emerge" patients received higher doses of aducanumab than those in the "Engage" trial. In Biogen's post-study analysis, researchers found that a subset of "Engage" patients who received high doses also demonstrated a reduction in clinical decline.

Since the release of that analysis, investors, analysts, and researchers have argued over whether it is strong enough to support regulatory approval. We're not much closer to an answer now than we were a few months ago. Though the FDA committee vote dashed most hopes, the FDA's review extension naturally sparked a few.

And another point in Biogen's favor? The fact that, if approved, it would become the first Alzheimer's treatment on the market that actually reduces decline in cognition and daily function. There aren't many treatment options out there for Alzheimer's patients, so that may weigh a bit as regulators evaluate the data.

Biogen's outlook

Beyond aducanumab, Biogen's prospects don't look exceptionally bright. The company's outlook for 2021 full-year revenue is in the range of $10.45 billion to $10.75 billion. That includes "a sharp decline" in U.S. revenue for multiple sclerosis blockbuster Tecfidera and a drop in cancer blockbuster Rituxan's U.S. sales as well. Increasing generic and biosimilar competition is set to hurt both products. This revenue forecast includes the potential approval and launch of aducanumab.

The 2021 forecast is already lower than the $13.4 billion in 2020 full-year revenue. And 2020 revenue fell 6% from the previous year.

Biogen expects eight mid-stage to late-stage data readouts this year from various programs. And late last year, the company announced a depression and movement disorder therapy collaboration with Sage Therapeutics (SAGE -6.82%). The $1.5 billion investment gives Biogen the right to co-develop and co-commercialize two Sage candidates in the U.S. -- one is in phase 2 and the other is in phase 3. Biogen also gains an exclusive license to the product candidates in most countries outside of the U.S.

But in the eyes of most analysts and investors, these efforts can't replace the potential of the aducanumab program. People will continue to talk about Biogen until the FDA decision. If the decision is positive, people will be talking about and investing in Biogen for a long time to come. If not, it might take the biotech company a long while to recover -- from both an earnings and share price perspective.