Over the past three years, Biogen (BIIB 4.56%) stock has taken investors on the ride of a lifetime. Shares have consistently oscillated between over $360 a share to near $200 levels. 

As it turns out, investors are heavily betting on the potential for its Alzheimer's disease therapy, aducanumab, to reach commercialization. Can Biogen successfully roll out a treatment to better help patients in a market estimated to reach nearly $5.7 billion by 2027?

Scientist studying pathogens in a biotech lab.

Image source: Getty Images.

The never-ending drama of aducanumab

The story began in March 2019, when Biogen announced that it would be discontinuing two phase 3 clinical trials, EMERGE and ENGAGE, evaluating the effects of aducanumab on halting cognitive degeneration in patients with Alzheimer's disease. Fast forward seven months later, and Biogen announced it was moving forward with its Biologic License Application submission for aducanumab. It turns out that patients in the EMERGE study witnessed a small benefit in terms of dementia improvement post-treatment with aducanumab. 

Meanwhile, patients in the ENGAGE study did not see the biologic's benefits replicated. However, a small subset of patients receiving the highest dose of aducanumab witnessed a positive therapeutic signal. 

It is important to note that the dropout rates were abnormally high for both studies. In fact, fewer than 62% of patients completed the required dose regimen after 78 weeks. Coupled with a minimal benefit in neurodegenerative improvement and lack of replicability, it is highly likely that we are seeing nothing more than random variations in the data. 

The U.S. Food and Drug Administration (FDA) holds this position as well. Back in November, a panelist of experts from the regulatory agency overwhelmingly voted that the ENGAGE and EMERGE clinical trials did not provide sufficient evidence for aducanumab's approval. This is not, however, a final decision.

The story should have ended right there. Unfortunately, everything becomes more complicated when there is a conflict of interest involved. In February, the Alzheimer's Association, a non-profit, retaliated against a group of researchers for tweeting a deeply skeptical article about aducanumab scheduled for publication in the organization's scientific journal. 

By no means did the Alzheimer's Association do this out of scientific integrity. In the past four years, it has received $800,000 in donations from Biogen. Not surprisingly enough, the organization lobbies heavily with the FDA for the biologic's approval. 

There's a lot at stake. On June 7, the FDA will have the final say about whether or not aducanumab will enter the market. 

Ghost of a chance

Unfortunately, the odds are overwhelmingly stacked against the company. Other than the risk factors outlined above, investors must consider that aducanumab's proposed mechanism of action largely relies on the beta-amyloid hypothesis -- that is, small viscous plaques in the brain that develop with old age are associated with decline in cognitive functions. Over the past two decades, big-name biotechs such as Eli LilyPfizer, and Johnson & Johnson have all invested billions of dollars into developing beta-amyloid targeted therapies, and none have succeeded. Biogen would likely become another casualty in the statistic. 

Should you give the stock a chance? 

Biogen is a good biotech company but not a good stock to invest in. From a valuation standpoint, shares are dirt cheap at only four times sales and 14 times earnings. However, its revenue and earnings fell by 24% and 49% year over year, respectively, to $2.694 billion and $813 million in Q1 2021. The decline was driven by loss of patent protection on its blockbuster drug Tecfidera, resulting in multiple generic entrants that took away more than $600 million of its sales.

Bullish investors may point out Biogen's ex-aducanumab pipeline as justification for buying the stock. Even that has its problems. 

Biogen will see seven late-stage pipeline candidate readouts targeting depression, postpartum depression, ALS, and more by the end of the year. Two of the first three indications are covered by the same drug, zuranolone, which failed a phase 3 clinical trial studying its effects on depression in 2019. 

Overall, given the decline of its core drug portfolio, as well as its pipeline woes, it's best to avoid Biogen stock in the near future. In the meantime, check out these hot biotechs currently at play.