Biogen (BIIB 3.18%) once stood out as one of the most successful biotech companies. It's portfolio of blockbuster multiple sclerosis drugs grew revenue into the billions of dollars. But as the company's top drugs faced losses of exclusivity, Biogen started to face one big problem: growth.
The biotech needed a new product or products to drive revenue as sales of older drugs declined. Biogen turned its attention to Alzheimer's disease. Along with partner Eisai, Biogen advanced Leqembi -- and the companies just reached a major milestone. The U.S. Food and Drug Administration (FDA) granted Leqembi traditional approval. So, why isn't Biogen's stock rising? Let's take a closer look.
The Aduhelm experience
First, let's back up a bit and consider Biogen's path up until this moment. The company's first attempt at conquering the Alzheimer's market failed. That was with monoclonal antibody treatment Aduhelm. Clinical trial results didn't win over the medical community, so Biogen cut investments in that program and put its efforts into another monoclonal antibody candidate -- today known as Leqembi.
Both Aduhelm and Leqembi target a build up of beta amyloid in the brain. But Leqembi's positive clinical trial results were more straightforward. The trial met its primary endpoint, showing significant slowing in patients' cognitive and functional decline. The FDA then granted Leqembi accelerated approval -- that was back in January.
Meanwhile, Biogen and Eisai went on to submit the treatment for traditional approval -- a key to gaining Medicare coverage. With accelerated approval, Medicare only would cover treatment in the context of a clinical trial -- greatly limiting patients' access to the therapy. But the payer said it would broaden this upon Leqembi's full approval. And following that approval last week, the Centers for Medicare & Medicaid Services followed through on the promise.
So, the companies now can fully launch Leqembi in the U.S., where more than six million people are living with Alzheimer's. Leqembi isn't appropriate for all of them though. The treatment is approved for those with early stage disease only.
On track to become a blockbuster
Still, the full approval is great news for Biogen. Leqembi is on track to become a blockbuster, with total sales of more than $12 billion from this year through 2028, according to GlobalData forecasts. Of course, Biogen and Eisai share profits, but this still could be a significant product for Biogen.
So, why didn't Biogen's stock rise on the news? They slipped about 3.5% in the trading session. And the stock is little changed year to date. It's important to remember Biogen soared nearly 40% in one day last fall when the company announced that Leqembi met its clinical trial goals. Investors then expected an approval, considering the positive data. So, we could consider that the approval itself probably was priced in.
But what about future sales? As mentioned above, we're talking about a treatment that could bring in billions of dollars. But uncertainties remain. And Biogen chief executive officer Christopher Viehbacher is the first to mention challenges ahead. During an earnings call earlier this year, he said, "this is not a round light pill that we're launching."
Patients need PET scans or lumbar punctures to confirm diagnosis before treatment can begin. Then, Leqembi is infused at infusion centers -- and here, a challenge could be capacity. These elements mean it could take time to roll out Leqembi and get all interested patients on board.
A headwind this year
Biogen also said it expects commercialization expenses will surpass Leqembi revenue this year. So, the new product actually represents a near-term headwind and will weigh on growth in 2023.
It's understandable that investors piled into the stock last year on optimism about a regulatory approval -- and it's understandable that today investors may hesitate to push the shares higher right away. Especially considering the huge initial gain.
So, should you buy Biogen stock right now? This depends on your comfort with risk. Potential challenges such as a lack of capacity at infusion centers could be addressed -- and Biogen has enough experience to handle such problems. The main point to consider is whether patients and doctors will flock to the treatment. That's an unknown right now and represents a risk.
If you're an aggressive investor, and are OK with that uncertainty, now is a good time to get in on Biogen. If Leqembi succeeds, the stock could climb considerably over the long term. But, if you're a cautious investor, you may want to wait just a bit longer -- to see whether this innovative treatment wins over doctors and patients.
