Tens of millions of Alzheimer's disease patients were given a rare dose of good news recently when Biogen (BIIB 3.18%) released some encouraging clinical trial results for its new Alzheimer's disease treatment candidate. The data from a big pivotal trial of that experimental treatment, called lecanemab, were surprisingly positive.
In response to the news, Biogen's share price rose by nearly 40% on Wednesday. But do these exciting results from Biogen and its collaboration partner Eisai (ESALY -0.60%) make Biogen a smart biotech stock to buy now? To take a stab at answering that, one first needs to understand how lecanemab differs from Biogen's previous attempt at an Alzheimer's disease treatment.
Why investors should be cautious
If you've paid any attention to Biogen over the past couple of years, you'll remember that it already earned approval for an Alzheimer's disease drug -- Aduhelm -- in June 2021. But to say that Aduhelm's sales haven't lived up to their early expectations would be the biopharmaceutical industry understatement of the century.
Alzheimer's is a progressive and ultimately fatal disease that affects an estimated 6 million older Americans and tens of millions more worldwide. As the only approved treatment option, one would expect Aduhelm to be breaking sales records. But it isn't.
During the second quarter, Biogen only recorded about $100,000 in Aduhelm sales, largely because Medicare won't pay for it. Citing a lack of evidence that it improves patients' rate of cognitive decline, the Centers for Medicare and Medicaid Services has decided not to pay for treatments like Aduhelm that earn FDA approval under an accelerated pathway.
Why this time is different
The FDA gave Aduhelm what it dubs "accelerated approval" -- a conditional approval that can be revoked if a subsequent trial doesn't confirm that the drug in question actually provides a long-term benefit.
Aduhelm was granted that accelerated approval based on its ability to reduce the presence of amyloid protein fragments associated with Alzheimer's disease and other forms of dementia. The agency couldn't give it full approval because there wasn't sufficient evidence that treatment with Aduhelm reduced the rates of cognitive decline among Alzheimer's patients.
However, lecanemab has shown success on that front in a phase 3 trial, so the road ahead of it should be much smoother. In the pivotal Clarity AD trial, early-stage Alzheimer's disease patients given lecanemab showed 27% less decline on the "Clinical Dementia Rating -- Sum of Boxes" (CDR-SB) test after 18 months of treatment. With 1,795 patients in the Clarity trial, there's no question that the drug was responsible for the measured difference in cognitive decline, as opposed to random chance.
With irrefutable trial data in hand, Eisai and Biogen intend to file for a traditional FDA approval for lecanemab by the end of March. That means there's a chance the partners could bring lecanemab to market near the end of 2023.
Image source: Getty Images.
Very little room for error
Before risking any of your money on Biogen stock, you should know that this troubled company doesn't have a lot of room for error. Sales of all its lead products are either stagnant or in steep decline. In fact, its total revenue has fallen by 25% over the past three years.
Most of Biogen's revenue comes from its multiple sclerosis treatments. Its oral multiple sclerosis drug, Tecfidera, was its top product until an unexpected court decision opened the door to generic competition a couple of years ago. Another popular oral multiple sclerosis drug -- Gilenya from Novartis (NVS -1.64%) -- is in danger of losing market exclusivity too. If a petition in front of the Supreme Court doesn't go Novartis' way, Biogen's multiple sclerosis franchise could soon have one more very popular generic option to compete with.
Buying Biogen stock in the hopes that lecanemab can accomplish more than Aduhelm isn't a bad idea. With declining sales of its established drugs weighing it down, though, investors will want to make sure they only add shares of this biotech stock to a well-diversified portfolio.
