Biogen Is the Right Alzheimer’s Stock … At the Wrong Time

BIIB stock - Biogen Is the Right Alzheimer’s Stock … At the Wrong Time

Source: Michael Havens Via Flickr

On Friday, Biogen (NASDAQ:BIIB) shares soared on news that one of its Alzheimer’s drug trials was showing tremendous promise. Specifically, BIIB stock jumped nearly 20% after an update on BAN-2401, a phase 2 drug that showed a statistically significant slowdown in the memory loss associated with Alzheimer’s.

No, BAN-2401 isn’t the only Alzheimer’s drug in the works. There are, in fact, five drugs already on the market approved as a treatment for the disease. BAN-2401 is a very promising prospect though, taking aim at a market that’s in desperate need of a better solution than what’s currently available.

BAN-2401 Works! (so far)

It was almost a bust, given the 12-month results posted in December.

BAN-2401, an antibody that takes aim at the amyloid plaque in the brain that’s thought to be a key cause of Alzheimer’s, was cast into a questionable light late last year. It didn’t appear to perform any better than a placebo, even at the highest dose being tested.

As it turns out though, the drug just needed another six more months to achieve measurable efficacy.

Much work still needs to be done. Specifically, a much bigger phase 3 trial still needs to take place … a stage that’s proven brutal to the biopharma industry in the recent past. As RealMoney’s Bret Jensen explains, “It is important to remember that this is only Phase 2 data and while encouraging, it is not the first time an Alzheimer’s drug that gotten past this hurdle. Every other company has blown up in Phase 3 development.”

He’s primarily talking about Eli Lilly (NYSE:LLY) and AstraZeneca (NYSE:AZN). The former’s solanezumab failed in phase 3 testing back in 2016, while the latter’s lanabecestat also failed to meet its late-stage endpoints, forcing the end of that trial last month.

If there was any company in a position to do what’s been tough to do though, it’s Biogen, but not necessarily with BAN-2401.

Aducanumab Validated

In and of itself, the encouraging news regarding BAN-2401 may not have moved BIIB stock the way it did on Friday. When coupled with similarly convincing results from another, similar Biogen-made Alzheimer’s drug called Aducanumab, however, the trial’s success thus far says Biogen is on the right track.

Aducanumab, like BAN-2401, is an antibody that binds with amyloid beta plaque, preventing it from clogging up brain synapses.

While amyloid beta has long been thought to be the cause of Alzheimer’s, it has never been proven. And, regardless, reducing and/or removing it from the brain has proven enormously difficult. Even though there are five approved treatments for Alzheimer’s available for use in the United States right now (with comparable approval and availability of such drugs outside of the U.S.), they take aim at the symptoms more than they take aim at the cause.

They’re also not even very good at abating the symptoms.

That’s what makes Biogen’s work so far so compelling. Morgan Stanley analyst Matthew Harrison explains “Given the significant concerns about Aducanumab since the blinded sample size increase, the fact that another amyloid agent that reduces plaque can achieve positive cognition results should increase investor confidence in the Phase 3 Aducanumab program.”

CanAccord’s Sumant Kulkami agreed, opining “We believe this nugget of good news (or perhaps the lack of further bad news) on the amyloid hypothesis could generate further enthusiasm around Aducanumab’s Phase 3 results.”

Bottom Line for BIIB Stock

Dana Blankenhorn was and still is right — now isn’t the time to step into BIIB stock.

Gains that take shape one day can be wiped away just as quickly, and although the euphoria here is palpable, Biogen still has a long way to go before getting either drug to the market. Investors are patient, but they may not be patient enough to keep BIIB stock propped up at current levels while waiting for more evidence that the company has a game-changer in its pipeline.

Still, given how underserved the Alzheimer’s market is, and the fact that it’s projected to be a $15 billion market by 2026 even without a game-changing drug on the market yet, Biogen is a name worth watching. Industry experts may well be viewing Biogen’s pipeline as the reason the market is apt to reach that size over the course of the next few years.

At the very least, traders would be wise to let the stock peel back before stepping in.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. Follow him on Twitter at @jbrumley.

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