Biogen (BIIB 0.23%) has come under fire for charging $56,000 a year for its new Alzheimer's drug. It's just one of the many controversies swirling around Biogen and the U.S. Food and Drug Administration (FDA) -- another serious criticism is that Biogen's drug had no more efficacy than placebo. This charge, that the drug doesn't actually work, makes the cost argument even worse for Biogen. Is $56,000 a fair price point? It definitely surprised the market -- several analysts had estimated the drug would price at about $10,000 a year.
Many observers are looking at alternatives to Biogen's drug. One stock that has taken the market by storm is tiny Cassava Sciences (SAVA 9.79%), with its share price running up 1,500% so far in 2021. Cassava is an Alzheimer's specialist that has a drug entering phase 3 trials later this year. How much will Cassava's drug, simufilam, cost? Motley Fool editor and analyst Olivia Zitkus and Fool.com writer Taylor Carmichael have a virtual discussion about Cassava and Biogen. This segment was recorded live on July 30.
Olivia Zitkus: Aduhelm is administered by IV, intravenously, and simufilam is orally administered, in a pill form. You have any ideas of costs here, Taylor, or potential? I imagine they haven't even really crossed that bridge.
Taylor Carmichael: They have not. It's really interesting too, because the CEO has said, "I'm a scientific researcher, I don't know how to market drugs, I don't know how to sell drugs." He's looking to get his company acquired. He has literally come out and said that. Which, if you can play poker, that's not how you do it. You don't tell people, "I want to be bought." That just lowers the price. I don't know if he should have done that. To me, he's a very honest guy. I watched that interview and I'm like, "Dude, you're so honest, that's too honest."
Olivia Zitkus: [laughs]
Taylor Carmichael: He says, "I don't know how to do that. I don't know how to market, I don't know how to sell. That's not what I do. I'm a scientific researcher. I've been doing this for a long time."
Olivia Zitkus: Yeah.
Taylor Carmichael: It doesn't necessarily mean they will be acquired. What he might mean is, we will have a structured deal with Big Pharma to distribute this drug, to do all the sales and all that stuff, but he's not planning on doing it himself. He's either looking to be acquired, the company's acquired, or looking for a deal with Big Pharma. You can rent out a sales force, so that's not a deal-breaker by any means.
Olivia Zitkus: Right.
Taylor Carmichael: It's interesting. But no, he does not have a price, does not have anything in mind. You know, $56,000, that is such a crazy price. That's a niche price, $56,000. That's a price you do on a drug with a small market and a small number of people who have it, because you're trying to get your money back and make a profit. $56,000 to me is just greed. I'm like, "How do you justify that?"
Olivia Zitkus: Yeah.
Taylor Carmichael: I think what they are doing, the way they are going to try to justify it, is insurance companies are paying a lot of money for Alzheimer's patients for keeping them, taking care of them, feeding them, and all the stuff you have to do with people who are losing their memory and have all the problems with Alzheimer's, agitation and all that. They have to be cared for. But the problem, as I see it, is this drug is not going to reduce any of those costs. Patients aren't getting better. You're just slowing the decline. So they're still being in care facilities, there's still being looked after, and you're just adding whatever $100 billion you think you're going to get for your drug. As a taxpayer, I would say Medicare should not pay for this, personally. If it doesn't work?
Olivia Zitkus: Right.
Taylor Carmichael: if the FDA is being investigated for approving it? And you're asking so much. This has kind of been a fiasco. It should have been good news for Biogen, but it's kind of been a fiasco for them.
Olivia Zitkus: It has absolutely been a fiasco and it leads to a lot of interesting ethical discussions like the one we're just dancing around at the moment.