Biotech giant Biogen (BIIB 0.44%) was underperforming the market this year -- that is, until the company's shares soared by as much as 37% last week. The drugmaker's major win in the stock market came after it reported positive top-line results from a phase 3 clinical trial for lecanemab, a potential therapy for Alzheimer's disease (AD).

Biogen is developing lecanemab in collaboration with Japan-based Esai. Why were these results such a big deal for Biogen? And is it a good idea to follow the crowd and purchase shares following these recent developments?

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A rare clinical win against Alzheimer's disease

Many companies have tried and failed to develop new and innovative therapies for AD. Based on the newly released top-line results Biogen and Esai shared, lecanemab could be one of the most significant wins in this area recently. Investigators pitted lecanemab against a placebo in this study.

The trial enrolled 1,795 early-AD patients and sought to measure the safety and efficacy in treating those with mild cognitive impairment due to the progressive and debilitating illness. At 18 months after the start of treatment, lecanemab had reduced cognitive clinical decline in AD patients by 27% compared to the placebo, thus hitting its primary endpoint.

The medicine achieved all its secondary endpoints, too. So things look good for lecanemab. But is that a good enough reason to purchase Biogen's shares, especially considering its significant jump following these recent events?

Biogen still faces challenges 

Biogen's current lineup is not performing well. During the second quarter, the company's revenue declined by about 7% year over year to $2.6 billion. Its top line is dropping for several reasons. First, its multiple sclerosis (MS) medicine Tecfidera is facing generic competition in the U.S.

During the second quarter, Tecfidera's sales decreased by 18.4% year over year to $397.9 million. Meanwhile, Tysabri, which is also an MS medicine, saw its revenue decline by 1.5% year over year to $516.2 million. Biogen expects Tysabri's sales to remain more or less flat for the rest of the year as a result of stiffer competition from other MS treatments.

Moreover, the drugmaker expects biosimilars for the treatment to enter the market as early as next year.

Then there is Spinraza, a treatment for spinal muscular atrophy. During the second quarter, Biogen's sales from Spinraza dropped by 13.7% year over year to $431.1 million due to increased competition. The company expects the headwinds related to Spinraza to continue, meaning the medicine will almost certainly see its sales head south in the coming quarters.

Tysabri, Spinraza, and Tecfidera were Biogen's best-selling products during the quarter (in that order), and they all seem to be facing insurmountable problems. They will keep contributing to revenue for a while, but will be unable to drive top-line growth from here on out. What about the company's already approved AD drug Aduhelm?

Right now, it is a bit of a flop. During the second quarter, sales of Aduhelm came in at $100,000. It earned approval from the Food and Drug Administration (FDA) under its accelerated approval pathway. However, earlier this year, the U.S. Centers for Medicare and Medicaid Services (CMS) decided it would only cover medicines approved via accelerated approval for the tiny population of patients enrolled in CMS-approved clinical trials.

Given the highly prohibitive price of Aduhelm (its annual cost is $28,200) -- not to mention the fact that many physicians were already hesitant to prescribe the medicine due to its somewhat unconvincing results in clinical trials -- it's not surprising that it is not performing well in the market.

Lecanemab's tall task will be to turn things around for Biogen. On the one hand, there are almost 6 million patients with AD in the U.S. alone, and many more abroad. There is a dire need for new treatment options, so the opportunities could be huge.

On the other hand, lecanemab is also under consideration by the FDA for accelerated approval. If it earns the green light, it will initially face some of the coverage challenges Aduhelm has encountered.

But if the full results for lecanemab's ongoing study are positive, Biogen and Esai will use them to apply for a regular approval that would free the investigational AD therapy from the coverage constraints currently plaguing Aduhelm. It's also worth noting that many other biotechs are working on competing treatments.

The list includes Eli Lilly and Prothena. Biogen is ahead of these other companies, but a lot could still derail its plans. There is no doubt that lecanemab's recent win improves Biogen's prospects. But the biotech's future remains a bit of a question mark.

In my view, investors comfortable with some volatility might consider adding a few shares to their portfolios. Any more than that would be too risky.