Biotech giant Biogen (BIIB 1.69%) has been trying to develop a successful therapy for Alzheimer's disease (AD) for a long time, and its efforts seem to be about to pay off. Earlier this year, the U.S. Food and Drug Administration (FDA) granted accelerated approval to Leqembi, a treatment for AD that Biogen co-markets with Japan-based drug company Esai.

Accelerated approval currently comes with severe restrictions in the U.S., but Leqembi is under consideration for full approval by the FDA. Biogen's prospects could be bright with this catalyst on the way, but there's more to the story. Let's consider whether it's worth investing in Biogen with this major potential development on the horizon.

Leqembi's market opportunity could be massive

Let's first learn why accelerated approval limits Leqembi's potential in the U.S. The current policy of the Centers for Medicare and Medicaid Services (CMS) is to cover medicines that go through the accelerated approval pathway for AD, like Leqembi, only for those patients who are enrolled in CMS-approved clinical trials.

That's not a lot of patients; it's certainly significantly fewer than the more than 6 million people with AD in the U.S. And without coverage from government programs, not that many patients will be able to afford the $26,500 annual price of this medicine. Fortunately, if Leqembi earns full approval, that will solve this problem as it would then be eligible for coverage by the CMS.

The FDA set a PDUFA target action date (the latest date by which it should complete the review of Biogen and Esai's application) of July 6, so we will know soon. Many companies have tried and failed to develop effective treatments for AD, so the full approval of Leqembi would be a significant breakthrough, and a lucrative one at that.

According to management consultancy Global Data, Leqembi could generate $12.9 billion in sales by 2028. Note that this estimate includes revenue for the therapy in other regions, such as Europe, where it's awaiting approval. Biogen and Esai are set to share the revenue and costs associated with the medicine equally, so that could be an additional $6.5 billion in sales for Biogen in about five years.

In 2022, Biogen's top line came in at about $10.2 billion. If Leqembi's revenue prediction comes true, Biogen should be able to grow its revenue at a good clip over the next half-decade and beyond.

Should investors pull the trigger?

Although Leqembi could be a game-changer for Biogen, the problem is that the biotech is highly reliant on this potential approval. The company's revenue in 2022 decreased by 7% year over year as many of its top-selling medicines continued to face competition, generic or otherwise. That has been a problem for Biogen over the past couple of years.

BIIB Revenue (Quarterly) Chart

BIIB Revenue (Quarterly) data by YCharts.

Biogen hoped that Aduhelm, a previously approved (under accelerated approval) AD treatment, would help reverse this trend. But Aduhelm has been a massive flop, as physicians remain unconvinced that it's actually effective. Leqembi's data from clinical trials seemed much more promising. But if it fails to earn the green light for whatever reason, Biogen's stock will fall sharply.

That's the situation in which Biogen finds itself right now. In my view, it's best to wait for the approval of Leqembi before initiating a position in this biotech stock. The product, if approved, would give Biogen enough time (and additional funds) to develop important products to beef up its portfolio. But until then, the company's prospects hang in the balance. Interested investors should keep that in mind.