Just a few days ago, we published an article on Biogen (NASDAQ: BIIB) and how its Alzheimer’s drug that could change the world was potentially soon to be approved. The markets clearly thought it had a high chance of approval, giving the company a 40+% return over the past week. However, on Friday, with trading of the company’s stock halted, it was announced that the FDA committee would not be moving forward on the company’s drugs.

Biogen wins reprieve as critic recused from aducanumab panel, but analysts still read rejection in the tea leaves | FierceBiotech

Biogen – Fierce Biotech

FDA and Aducanumab

FDA advisory committee, the advice of which the FDA pays close attention to, announced its decisions.

Today, the U.S. Food and Drug Administration (FDA) Peripheral and Central Nervous System Drugs Advisory Committee voted 1 yes, 8 no and 2 uncertain on the question, “Does Study 302 (EMERGE), viewed independently and without regard for Study 301 (ENGAGE), provide strong evidence that supports the effectiveness of aducanumab for the treatment of Alzheimer’s disease?”. The Advisory Committee also voted 0 yes, 7 no and 4 uncertain on the question, “Does Study 103 (PRIME) provide supportive evidence of the effectiveness of aducanumab for the treatment of Alzheimer’s disease?”, and 5 yes, 0 no and 6 uncertain on the question, “Has the Applicant presented strong evidence of a pharmacodynamic effect of aducanumab on Alzheimer’s disease pathophysiology?”. Finally, the Advisory Committee voted 0 yes, 10 no and 1 uncertain on the question, “In light of the understanding provided by the exploratory analyses of Study 301 and Study 302, along with the results of Study 103 and evidence of a pharmacodynamic effect on Alzheimer’s disease pathophysiology, it is reasonable to consider Study 302 as primary evidence of effectiveness of aducanumab for the treatment of Alzheimer’s disease?”

“Biogen thanks the many patients and advocates who shared their personal thoughts and experience at today’s Advisory Committee meeting, reflecting the significant unmet need for a treatment for Alzheimer’s,” said Michel Vounatsos, Chief Executive Officer at Biogen. “We appreciated the opportunity to share our data with the Advisory Committee, and we will continue to work with the FDA as it completes its review of our application.”

FDA Advisory Committees provide non-binding recommendations for consideration by the FDA. With the opinions expressed at the Advisory Committee and the data presented, the FDA will continue the review process with a decision on whether to approve the aducanumab Biologics License Application by March 7, 2021.

FDA and Aducanumab, Biogen Press Release

The questions with the FDA advisory committees contained 3 key questions. The first was whether Aducanumab is effective in the treatment in Alzheimer’s, which was primarily yes or uncertain (3/11). The second was whether another study supports the effectiveness of Aducanumab in treating Alzheimer’s (4/11) yes or uncertain.

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The last was about whether the PRIME study provides evidence for the effectiveness of Aducanumab (5/11) yes. The committee primarily voted against Study 302 as primary effectiveness. The treatment and drug (Aducanumab) continue to provide significant volatility to Biogen’s share price, although the news is disappointing.

We expect the coming week to be difficult for Biogen, in the light of recent volatility in the company’s share price.

Aducanumab and the Science

At this point, it comes down to Aducanumab and the science and whether the FDA approves it. Peak sales figures for Aducanumab vary drastically, all the way from $5 billion to a peak of $20 billion.

Addendum: The antibody aducanumab reduces Aβ plaques in Alzheimer

Aducanumab Data – Nature

Alzheimer’s disease is incredibly poorly understood; however, that’s not unique in the realm of degenerative neurological diseases. The disease has a substantial base at 6% of those >65, and it has no real treatments, which is why the news around Aducanumab is so significant. 70% of those with the disease is expected to come from genetics, although there are other risk factors.

Scientists have yet to understand whether the plaque from Alzheimer’s is either a symptom of a disease, or the plaque itself is what’s causing the symptoms. That’s huge in terms of treatment, however; there’s a multi-billion dollar effort to try and find treatments that affect the plaque. Aducanumab is a drug that targets these plaques.

At this point, the science indicates that it’s a toss-up, but it’s likely that these plaques are part of the symptoms of Aducanumab. The FDA advisory committee doesn’t seem to believe that Aducanumab solves the disease, although ~20-30% seems to see it as semi-promising. The FDA isn’t held by this decision, although it will announce a result in the next 5 months.

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However, based on the peak sales, if the FDA does approve Aducanumab, it’ll have a massive effect on Biogen. The disease would be a “company maker” and likely add tens of billions in market capitalization. It would add billions in R&D to Biogen and potentially build a multi-decade franchise for the company to position itself.

Biogen Outside of Aducanumab

However, it’s worth that Biogen outside of Aducanumab has significant potential and ability to reward shareholders. The company still has an exciting business of assets.

Biogen Asset Portfolio – Biogen Investor Presentation

Biogen has an impressive asset portfolio with 30 clinical programs and 22 new clinical programs since 2017. The company has 8 programs in Phase 3 that it’s filed and expects 6 mid-to-late stage readouts by the end of 2021. The company has been working on new collaborations and is working on aggressively expanding its neurological portfolio.

Past that the company has new pain, immunology, and biosimilar drugs. The company’s biosimilar business is particularly exciting. Biosimilar businesses don’t have the same patent expirations and risks, and they represent an impressive source of diversity for Biogen’s businesses. That’s exciting for investors.

Investment Recommendation

Biogen has a small net-debt positioning, with just $2.8 billion in debt for a more than $50 billion company. M&A has been popular recently, with Bristol-Myers Squibb (NYSE: BMY) and Celgene merging, along with AbbVie (NYSE: ABBV) and Allergan. Biogen is one of the mid-sized companies that have yet to merge, and we see Gilead Sciences (NASDAQ: GILD) would be a good target.

Gilead Sciences has a strong antiviral business, a growing immunology business, and a rapid focus on its oncology business. Biogen would add some overlap, and an exciting neurological business. Both companies trade at low valuations as they search growth versus massive existing franchises that need to be solved.

That M&A could also temporarily reward shareholders. Past this, Biogen’s earnings have remained strong, with the company’s non-GAAP EPS at single-digits along with the company’s FCF yield at the low double-digits. We expect share price pressure from the FDA’s news, which could result in a unique investment opportunity.

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We see the company as a buy at current prices, although we recommend loading up at less than $250/share.

Biogen Risks

Biogen’s risk is of course the massive amount of R&D required in the business, with no guarantee of success. The company is continuing to invest heavily, however, and there is no guarantee that it pans out. Those risks are worth paying close attention to for shareholders. However, we expect, over time, Biogen will generate outsized rewards.

Conclusion

Biogen has an impressive portfolio of assets worth paying close attention to. The company has continued cash flow from its existing asset base and a number of incredibly exciting data read-outs in the coming years. The next several years will be the culmination of billions of dollars in R&D and could determine the company’s future.

The FDA’s advisory committee’s response on Aducanumab was disappointing for shareholders, and could lead to a unique opportunity. However, the science still indicates a potential approval, if for nothing else, due to a lack of even close to viable treatments for the drug. That could help support the company incredibly significantly.

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Disclosure: I am/we are long BIIB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



Via SeekingAlpha.com