Investing in pharmaceutical companies is never easy. But with Biogen (NASDAQ:BIIB), that sentiment is multiplied a hundred fold. A nasty part of this business is that everything rides on key, flagship drugs. With science being the ultimate skeptic, passing clinical muster is an absolute. And Biogen stock demonstrated how critical this concept is within this year.
At the start of 2019, BIIB stock got off to a quick lead. Although shares have been frustratingly choppy over the trailing five years, Biogen did have one ace up its sleeve: aducanumab. A groundbreaking drug designed to slow cognitive decline in some Alzheimer’s disease patients, Biogen began conducting clinical trails a few years back.
However, in March of this year, the pharmaceutical halted two late-stage trails for aducanumab. Unfortunately for both Biogen engineers and hopeful patients, an independent audit revealed that the drug was likely ineffective. Upon the news, Biogen stock collapsed more than 29%.
And between that point and Oct. 21, BIIB stock really didn’t move much. Everything hinged on aducanumab, which represented – excuse the expression – a pharmaceutical cash cow.
However, that same failed drug was responsible for a massive upswing in Biogen stock a day later on Oct. 22. Essentially, the Food and Drug Administration gave the green light for the underlying company to reapply for aducanumab’s approval.
Going on the media circuit, Biogen CEO Michel Vounatsos expressed confidence that this time, aducanumab will receive FDA approval. But how likely is such an event, and how should investors approach BIIB stock?
We’ll take a look at the good, the bad, and the ugly.
The Good News for Biogen Stock
According to Vounatsos, the key reason why aducanumab failed was due to a small sample size. Additionally, the first round of clinical trials did not feature dosage diversity. Basically, Biogen did not give patients a strong enough dosage.
However, a new analysis on a much larger data set with the higher dosages revealed a stronger mitigation of Alzheimer’s disease symptoms. This encouraged Biogen to discuss the fresh findings with the FDA, leading to the green light to reapply.
Of course, this does not guarantee that aducanumab will ultimately receive FDA approval. There’s a big difference between applying for an Ivy League school and getting into one. And while Vounatsos has emphasized his confidence, I would expect that from any CEO.
Still, it gives aducanumab a chance. For now, that’s all investors need, having pushed BIIB stock roughly to where it was a year ago.
But there’s also a human component to aducanumab. The Alzheimer’s Association estimates that 5.8 million Americans suffer from the disease. Further, it’s the sixth leading cause of death in the U.S. If aducanumab works as advertised this time around, it would represent a medical breakthrough.
Plus, with so many people suffering from Alzheimer’s, Biogen stock will be worth its weight in gold.
The Bad News for BIIB
Although the enthusiasm is palpable for Biogen stock, investors should take a breather before acting on it. As with any equity, you don’t want to jump in after a big move without some serious thought.
While the reasons forwarded for why the first trial of aducanumab failed makes sense, it doesn’t necessarily mean that this latest analysis implies a tangible success for the drug. And investors, medical researchers and patients have reasons to be skeptical.
Indeed, I would guess that any intellectually honest medical doctor would advise his or her patient to keep grounded. First, no one outside of Biogen has seen the details of this larger data set analysis. Thus, without peer review, it’s hard to generate much excitement.
As Dr. Michael Weiner, Alzheimer’s researcher at the University of California, San Francisco, told the New York Times, aducanumab could spark “the dawn of a new era.” However, Weiner noted that this is not a cure, but rather, “It is a slowing of decline. The practical impact on patients remains to be seen.”
Not only that, research for Alzheimer’s and other dementia-related diseases is littered with failure. Roche (OTCMKTS:RHHBY), Eli Lilly (NYSE:LLY), AstraZeneca (NYSE:AZN), Pfizer (NYSE:PFE) and Merck (NYSE:MRK) have all abandoned this market.
You can look at it two ways for BIIB stock: it’s a massive opportunity if the company wins, but that probability is very, very low.
And Finally, the Ugly
Thus, comes the million-dollar question: how should investors approach Biogen stock?
Here’s the ugly truth: I have no idea. And I suspect that most analysts feel the same.
Without the peer-reviewed analysis of Biogen’s new study, investors are operating in the dark. Therefore, if I had to make a guess, I would rely on what we do know. And that is Alzheimer’s treatments have a bad track record.
Even Biogen’s initial clinical trial failed when held to an independent audit. Therefore, BIIB has the credibility hurdle. Given that we won’t know the details for some time, gambling on Biogen stock right now seems risky.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
