Several big-name companies are racing to develop effective therapies for Alzheimer's disease (AD), a goal that has proven difficult over the years. It's no wonder that this area is attracting a lot of attention: About 5.8 million people in the U.S. had AD as of 2020. Some estimates put that number at 44 million worldwide.

Two drugmakers that feature in the race to find a successful AD treatment are Eli Lilly (LLY 0.17%) and Biogen (BIIB 2.17%). Both healthcare giants have made progress over the past year. And within another 12 months, a lot could happen that could make or break their prospects; it will be an exciting time for investors.

But which of these companies has the best shot at remaining a leader in this therapeutic area from here on? And which is the better buy overall? Let's dig in and find out.

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Eli Lilly still has a long way to go

Eli Lilly's AD candidate, donanemab, works by targeting clusters of the beta-amyloid protein that accumulate in the brains of patients and are thought to be linked to the cognitive decline associated with the disease. In the third quarter of 2021, the drugmaker submitted an application to the U.S. Food and Drug Administration (FDA) for donanemab in treating early AD.

But there's a catch. Eli Lilly submitted -- and the FDA accepted -- donanemab under the accelerated approval pathway. This would allow Eli Lilly's candidate to be granted approval based on a "surrogate endpoint." Let's look at what that means.

In clinical trials, investigators generally measure outcomes (known as endpoints) that directly confirm clinical benefit. Sometimes they choose endpoints that don't directly measure clinical benefits but are thought to be a good approximation of these benefits -- surrogate endpoints. The accelerated approval pathway is meant for therapies that target a serious unmet need, and using surrogate endpoints can help speed up the process.

Even if donanemab earns accelerated approval, Eli Lilly will still have to conduct a study to confirm that it's safe and effective. The company is currently running a phase 3 clinical trial that would serve that purpose, and plans to release top-line data from this study in mid-2023.

The rest of Eli Lilly's portfolio is impressive. While it's true that the company's revenue declined by 4% year over year to $6.5 billion in the second quarter, that was largely due to its COVID-19 lineup losing steam. The drugmaker's key growth products continue to perform well, including diabetes treatments Trulicity and Jardiance, cancer drugs Verzenio, and immunology medicine Taltz.

Furthermore, Eli Lilly recently earned approval for products such as cancer medicine Retevmo and diabetes treatment Mounjaro. There are more exciting products in the pipeline for the company. And thanks to all these, the future looks bright for the healthcare giant.

Biogen's recent win helps improve its prospects

Biogen's AD portfolio has at least two important products: Aduhelm and lecanemab, both of which also target beta-amyloid plaques in the brain. Biogen earned approval for its AD therapy, Aduhelm, last year. But the medicine is hardly generating any sales. Let's see why that's the case.

Aduhelm also followed the accelerated approval path. However, earlier this year, the U.S. Centers for Medicare and Medicaid Services (CMS) decided only to cover AD therapies approved under accelerated approval for patients enrolled in CMS-approved clinical trials. This severely limits the number of people who could have access to Aduhelm in the U.S.

However, things look rosier on the lecanemab front. On Sept. 27, Biogen and its partner, Eisai, reported positive top-line results from a phase 3 clinical study for lecanemab. The medicine reduced clinical decline, based on a scale that measures cognitive function, by 27% compared to a placebo 18 months after the start of treatment.

The two partners completed a regulatory submission for the therapy in May under the accelerated approval route. Biogen and Eisai will use this ongoing phase 3 trial as a confirmatory study. They plan on submitting applications for full approval to various regulatory agencies worldwide by the end of March 2023.

Biogen badly needs lecanemab, because the company's current lineup is struggling. Biogen's multiple sclerosis medicine, Tecfidera, lost patent protection back in 2020. And some of its other products are also encountering headwinds. In the second quarter, the drugmaker's top line declined by about 7% year over year to $2.6 billion.

Aduhelm was supposed to be its new blockbuster, but things haven't worked out that way. If lecanemab fails to earn approval, Biogen will be in even more trouble.

Which is the better buy?

Biogen already has an approved AD therapy, although it isn't performing well on the market. The biotech's next candidate, lecanemab, has already delivered solid top-line results in a phase 3 study. In this area, Biogen has the lead over Eli Lilly.

But overall, Eli Lilly is a much better stock to invest in today:

LLY Revenue (Quarterly) Chart

LLY Revenue (Quarterly) data by YCharts.

In recent years, Eli Lilly has generally racked up higher revenue, stronger revenue growth, and higher or comparable net income. Also, its pipeline is full of promising candidates. The newly approved Mounjaro has the makings of a therapy that could become the most successful in the history of the industry. Other products coming through the pipeline, including the once-weekly insulin product Basal Insulin Fc, also look highly promising.

Eli Lilly's price-to-earnings ratio makes its stock look a lot more expensive, and rightfully so. The company's prospects right now look much more attractive, which is why it deserves a premium over Biogen. Investors focused on the long game should still opt for Eli Lilly.