Investors on Wall Street continued to have doubts about when the stock market is likely to recover, as ongoing worries about inflation, interest rates, and the global financial system have everyone on edge. Futures contracts on the Dow Jones Industrial Average (^DJI -1.24%) and S&P 500 (^GSPC -0.73%) pushed slightly into positive territory after having traded down a bit earlier in the morning, and the Nasdaq Composite (^IXIC -0.99%) rebounded from declines of as much as 1% in premarket trading.
One corner of the market had extremely good news. Biotech stocks have been among those hit hardest by the bear market in 2022, but Biogen (BIIB 0.36%) announced good news in a key clinical trial that has huge implications for those suffering from a harsh and debilitating disease. Biogen's favorable outcome also gave industry peer Eli Lilly (LLY -1.09%) a boost, on optimism that a new way of coming up with important treatments could spur further successes.
Biogen makes an Alzheimer's breakthrough
Shares of Biogen soared more than 50%. The biotech pioneer came out with data from a phase 3 study of its candidate treatment for fighting Alzheimer's disease, and the reception from the medical community and shareholders was extremely positive.
Biogen and trial partner Eisai announced that its 1,800-patient phase 3 confirmatory Clarity trial of its lecanemab anti-amyloid beta protofibril antibody had produced positive top-line results in patients suffering from mild cognitive impairment due to Alzheimer's disease. The Biogen/Eisai treatment met the primary endpoint of significantly reducing the clinical decline on the global cognitive and functional scale most commonly used to evaluate Alzheimer's patients. It also met key secondary endpoints, which included changes in amyloid levels and improvements in various other scoring assessments for those suffering from the disease.
The news validates the strategic shift that Biogen made after its Aduhelm Alzheimer's treatment sparked controversy about its effectiveness in fighting the disease and called into question its entire program. The U.S. Food and Drug Administration approved Aduhelm in 2021, but Medicare limited its coverage to patients enrolled in approved clinical studies pending more evidence to support Aduhelm's efficacy. Rather than doubling down entirely on Aduhelm, Biogen moved forward with lecanemab in an effort to demonstrate the newer treatment's effectiveness more clearly.
With the positive results, Biogen and Eisai hope to file for FDA approval of lecanemab in early 2023. Stock analysts rushed to upgrade their views of Biogen's financial prospects, pointing to more than 1 million eligible patients who could make lecanemab a multibillion-dollar blockbuster.
Can Eli Lilly ride Biogen's coattails?
Also picking up a substantial gain in its share price was Eli Lilly. The stock climbed 8% as investors tried to figure out second-order effects of the Biogen decision.
A pair of stock analysts argued that Lilly stands to benefit from the positive Biogen trial results. Cantor Fitzgerald pointed to Lilly's candidate Alzheimer's treatment donanemab as a potential winner, given that it's aiming to follow the same general playbook as the Biogen treatment in seeking to control amyloid levels in Alzheimer's patients. With lecanemab's success potentially reversing the skepticism over such treatments that the Aduhelm experience created, there's room for Lilly's candidate to participate in the market if it proves equally effective. Morgan Stanley made similarly positive comments about Lilly's short-term stock price.
Lilly is much larger than Biogen, so even a positive result from donanemab won't move the needle as much for it than for its smaller counterpart. However, the 8% premarket rise actually represents a larger boost in market capitalization for Lilly than Biogen shareholders have seen. That shows just how big the Alzheimer's market could potentially be, leaving plenty of room for multiple winners to help patients in the space.
