What Investors Can Learn From Biogen's Drug Approval That No One Wants

In 2021, Biogen (BIIB 2.03%) received approval from the U.S. Food and Drug Administration (FDA) for its Alzheimer's drug candidate, Aduhelm. The approval was controversial, as some argued Biogen's clinical trials failed to prove the treatment's efficacy. 

In this video clip from "The Pharma & Biotech Show," recorded on Feb. 9, Motley Fool contributor Taylor Carmichael asks Dr. Frank David, author of The Pharmagellan Guide to Analyzing Biotech Clinical Trials, about what Biogen's drug approval means for investors and other biopharma companies.

Taylor Carmichael: Biogen got an FDA approval, even though they didn't prove efficacy in their phase 3 trial, but they did prove a reduction in the plaques. Should other drug companies, as they figure out how their scheduling and how they're doing their protocol, should they focus more on this objective criteria or is that approval just the desperation that we're seeing for people with Alzheimer's?

Frank David: Well, it's a great question, and honestly, I don't do so much medical device work now, but in the past I've done a bunch of medical device work. To me, it's always been true in medical devices, which is that the regulatory bar is much lower than that commercial and market access bars. I'm going to bring this back to Alzheimer's in a second, but if you think about medtech, the bar in terms of clinical efficacy data with rare exceptions. Let's take stent, drug-eluting stents out of it. But for the vast majority of medical devices, the data bar for getting approved is actually pretty low. What the problem is, if you have all these things get approved and nobody wants to use them and nobody wants to pay for them. That's one reason why you see M&A activity is relatively much more common in medtech after something has already been on the market. It's much less common that a positive pivotal trial in medtech triggers an acquisition. Whereas in drugs, historically speaking, the pivotal studies have been designed such that most of the risks has been discharged, if you have positive results out of your trial. If I'm Pfizer or Merck or whomever, I see you have positive results, or I think you're going to get positive results out of your phase 3 study. I'm pretty sure you're going to get approved and only and I appreciate you're going to be approved. I have already done a bunch of work and I'm pretty sure you're going to get prescribed and I can build a model and figure out what that's worth to me.

I think, to me, the the Alzheimer's field has basically taken the crappy medtech model and brought it into biotech. Which is you win the battle but you lose the war. You get your FDA approval and nobody gives a damn, because they just don't really believe that your drug does anything. I think we're seeing that with the revenue numbers that are being put up for Aduhelm, which are minuscule, honestly. I don't think that's going to change. I think that in an area like Alzheimer's, where let's be honest, there's going to be a ton of payer scrutiny and a ton of clinician scrutiny around these drugs. This is not just like some little thing that's going to fly under the radar. We're talking millions of patients potentially. I don't think it's really going to wash to have a crappy endpoint and tiptoe over at the bar, which is basically on the floor for regulatory approval, and then think that you're going to get clinical uptake. I don't have any horses in this race necessarily, but I would say, if I were advising a biotech or pharma company on this, knowing what we know now with the how Biogen is playing out, I'd really be cautious about planning for our success around a surrogate endpoint like beta amyloid.