Biogen (BIIB): Why Aducanumab Excitement Might Be Overblown

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On March 20, Biogen Inc (NASDAQ:BIIB) reported positive results from a phase 1b study on its pipeline candidate aducanumab (BIIB037), an anti-amyloid beta antibody. The drug is being developed for the treatment of Alzheimer’s disease.

Biogen BIIBFollowing the announcement of the results, shares of Biogen jumped to all-time highs above $480 before pulling back to current levels around $425.

With the Alzheimer’s disease research space littered with a host of failures, this is great news for BIIB. Analysts predict that the drug, if approved, could garner more than $10 billion in sales for Biogen and partner Eisai Co.

With such huge potential — but such a sharp pullback — investors are likely torn about whether they should buy (more) Biogen stock from here.

We’ll examine the details of the study as well as the current business state of BIIB to see if there’s an opportunity here.

Study Design Casts Shadow on the Drug’s Potential

According to a Biogen release, “Treatment with aducanumab produced a dose- and time-dependent reduction of amyloid plaque in the brain.”

The study employed two exploratory analyses — Mini Mental State Examination (MMSE) and Clinical Dementia Rating (CDR) scales — to determine the effectiveness of the drug. Alfred Sandrock, a senior vice president and chief medical officer, had this to say:

This is the first time an investigational drug for Alzheimer’s disease has demonstrated a statistically significant reduction on amyloid plaque as well as a statistically significant slowing of clinical impairment in patients with prodromal or mild disease.”

It is worth pointing out that BIIB took specific steps that most certainly affected the results of the study. During the enrollment stage, the company screened every patient to be sure each had AD and not other forms of dementia, according Reuters. However, Biogen also screened for people with early-stage Alzheimer’s, and that actually might affect the significance of the results for the worse.

Amyloid, the agent that aducanumab targets, accrues in the outer part of the cortex as the disease worsens, according to a recent Mayo Clinic study — which, by the way, says that the progression of dysfunctional tau protein is the main driver of AD, not amyloid accrual.

Still, let’s ignore the part that tau protein is the main driver of AD for now, since substantial data has already proven that amyloid is also a major culprit and Biogen has found success targeting this agent.

The fact that amyloid accumulates as the disease worsens means that the level of amyloid at the mild stage — the stage BIIB’s study worked on — is relatively low. If at the early stage of AD, treatment with aducanumab is as dose- and time-dependent as the study found, there is a genuine cause to worry that aducanumab may not be effective and safe for treatment in latter stages of the disease.

Moreover, the fact that safety issues — notably amyloid-related imaging abnormality (edema), or ARIA-E — heightened as dosage was increased also buttresses the fact that aducanumab may not be as effective for AD treatment as stated.

It is worth mentioning that the development of ARIA-E was most prominent in patients who carry ApoE4. And according to National Institute on Aging, ApoE4 is present in about 40% of people with late-onset AD — which accounts for about 90 percent of AD cases.

By implication, close to half of AD patients might not be able to fully benefit from aducanumab because they will have to take lower doses because of the presence ApoE4.

Another point from the study is that, of the two exploratory analyses, only MMSE showed statistical significance in the 3mg/kg and 10mg/kg patient groups. CDR results were statistically significant just for the 10mg/kg group. This points out that BIIB could encounter some issues with dosing. These issues could be magnified in phase 3 studies.

Investors Should Not Be Overoptimistic

With this in mind, the best-case scenario could be that the drug would be approved for mild AD, thereby reducing its market potential. So the wild run in BIIB might be overly optimistic and overdone.

In addition, with the concern on dosing potentially limiting the market potential of aducanumab, the chances that the drug, if approved, would bring a significant increase in revenues is slim.

Lastly, if we want to gauge BIIB with a value mind-set, there’s not much of a value here, either, with BIIB trading at almost 23 times forward earnings — well above any of the major indices, including the tech- and biotech-heavy Nasdaq.

While the positive results are something to celebrate in the AD space, investors might be a little too optimistic concerning Biogen.

As of this writing, Craig Adeyanju did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/biogen-stock-biib-aducanumab/.

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