In June 2021, shares of Biogen (BIIB -1.20%) soared to more than $400 after the Food and Drug Administration (FDA) granted accelerated approval to its Alzheimer's treatment Aduhelm. There wasn't the same level of bullishness this month, however, when the same agency granted the same authorization for another treatment, Leqembi (lecanemab). While the stock has risen in value this month, it definitely hasn't been taking off -- but why?

Accelerated approval isn't as attractive as it once was

There are a couple of reasons why investors aren't as bullish on the accelerated approval for Leqembi.

For one, Aduhelm has gone nowhere despite obtaining the same type of approval a few years ago. It was a controversial decision where the FDA granted the approval even though its advisory panel suggested not to. In the end, there wasn't much support for the treatment in the medical community, and Biogen opted to "substantially" scale back on its efforts to commercialize Aduhelm, effectively pivoting to lecanemab.

Last year, the Centers for Medicare and Medicaid Services (CMS) said it would only provide coverage for Aduhelm for patients who are involved in clinical trials. That led to Biogen's decision to effectively give up on the drug. And with CMS taking this approach on any other Alzheimer's drugs that obtain accelerated approval, it's little wonder why investors aren't bullish on the positive news around Leqembi.

Can Leqembi can attain traditional approval from the FDA?

The limitation from CMS on coverage relates to drugs approved under the accelerated approval pathway. If Leqembi obtains traditional approval (i.e. there is no need for a confirmatory trial to show that the treatment is effective), then it wouldn't be subject to the same limitations as Aduhelm.  

Biogen's partner on Leqembi, Eisai, submitted a Biologics License Application for the drug in January under the traditional approval route, and a decision could be made this year. If that application proves to be successful, then that's when shares of Biogen could take off, as that would give investors a reason to believe that the drug can significantly contribute to the company's top line.

Leqembi, unlike Aduhelm, has demonstrated that it can slow cognitive decline by 27% compared to a placebo. In Aduhelm's case, it only showed that it reduced levels of amyloid plaque, which some experts believe isn't enough to help treat Alzheimer's. But until the FDA makes a ruling on Leqembi for full, traditional approval, there is going to be considerable uncertainty surrounding the healthcare stock, as that decision could lead to either a surge in price or a significant sell-off. 

Biogen's lackluster results mean a lot is riding on Leqembi

The big problem with investing in Biogen right now is that its business simply hasn't been doing so well. In its most recent quarterly results, for the period ending Sept. 30, 2022, the company's sales of $2.5 billion were down 10% year over year. Biogen expects revenue of around $10 billion for 2022, which would be a 30% drop from the $14.4 billion it generated in 2019. Losses in exclusivity for its multiple sclerosis drug Tecfidera have hurt its financials, and the company needs something to boost its top line -- and Leqembi could play a big role in that.

Without the approval of Leqembi, it'll likely continue to be an uphill battle for Biogen. While it does have other assets in its pipeline, the Alzheimer's treatment is the most promising and the one that may help the business the most in the near term.

Should you buy Biogen's stock?

Given that lecanemab reduced amyloid plaque, it's not a surprise that it obtained accelerated approval, and so I wouldn't say anything has changed drastically in its outlook or its chances for traditional approval. The FDA still needs to be convinced of its effectiveness, and there's no guarantee of what its decision will be. That's why the safest route for investors is to wait on the sidelines to see what happens. With a volatile stock like Biogen, it's simply too risky to invest right now, as the FDA's decision could make or break the stock.