Biogen Stock Jumps on FDA Approval. What Wall Street Is Saying
Biogen shares rose nearly 60% after trading resumed Monday afternoon in the wake of broad approval of the company's Alzheimer's disease drug by the US Food and Drug Administration.
The pop in the stock was even more breath-taking than analysts had predicted, but seems in line with the FDA's action, which surprised even Biogen's (ticker: BIIB) bulls.
The news ignited shares of other drugmakers. In afternoon trading on Monday, US depository receipts from Biogen's partner Christian (ESALY) was up 53.7%, while shares of Eli Lilly (LLY), which is developing a similar Alzheimer's treatment, were up 9.6%. iShares Nasdaq Biotechnology Exchange Traded Fund (IBB), which tracks the biotech sector, was up 4.5%.
Shares of smaller companies working on Alzheimer's treatment also rose. Shares of Prothena (PRTA) jumped 15.2%, while Denali Therapeutics (DNLI) was up 8.4% and Athira Pharma (ATHA) was up 14.2%.
The label on Biogen's drug, aducanumab, is broad, meaning its use is not limited to certain categories of Alzheimer's patients. Bernstein analyst Ronnie Gall called the label "almost shockingly widespread", noting that it is approved for a much wider population than the population in which it was tested.
In addition, the agency has set a precedent for approving Alzheimer's drugs based on their ability to clear beta amyloid plaques, which are believed to play a role in the disease.
"This is long-awaited good news for Biogen and great news given the critical unmet need for Alzheimer's disease," SVB Leerink analyst Mark Goodman wrote Monday.
Citigroup analyst Mohit Bansal wrote in a separate note that the decision was shocking. "Unmet needs to win over science as the FDA finds a way to approve the drug," Bansal wrote. "The agency has taken a stance to approve biomarkers of amyloid plaque reduction rather than functional endpoints."
The agency requires Biogen to run confirmatory tests. But analysts downplayed the potential impact of the confirmatory study. Cantor Fitzgerald analyst Alethia Young wrote that she expects "significant use" of the drug, and that confirmatory studies "will take a long time to play out."
Piper Sandler analyst Christopher Raymond, who has argued against FDA approval of the drug, said the agency had "thrown the caution (and scientific rigor) to the wind."
He added that the confirmatory study will not be completed for long. "How actively the FDA will monitor the BIIB's fulfillment of that requirement, but investors are well aware that meeting these post-approval requirements can take years," they wrote.
Jefferies analyst Michael Yee, who was more confident the agency approved the drug, said investors wouldn't be concerned about the additional testing needed. The launch of the drug will now be the focus of investor debate, he added. There are logistical issues, and substantial questions on pricing.
"We find it improbable that payers will be too harsh, the drug will be over-focused and the massive impact it will have on so many families," Yee wrote.
Biogen announced that the drug would cost $56,000 a year for the maintenance dose, though the cost would be lower during the first year. This is well above what the Institute for Clinical and Economic Review, an influential voice on drug pricing issues, said could be supported by aducanumab's clinical benefits.
The group said in a May 5 interim report, "If using the mixed efficacy results from Phase III trials, our base-case analysis suggests an annual cost of $50,000 for aducanumab ... would not be commensurate with the benefits." It suggested prices between $2,560 and $8,290 per year.
Patient groups welcomed the news with enthusiasm.
"It's a new day," said Harry Johns, president and CEO of the Alzheimer's Association, which has advocated for the drug's approval. "This approval gives people living with Alzheimer's more time to live better."
However, medicine is not a cure. Dr. Samuel Gandy, a Mount Sinai professor and director of the Mount Sinai Center of Cognitive Health, said physicians will need to manage the expectations of patients and families. The purpose of medication is to slow the progression of the disease, not reverse it.
"If the drug works, families probably won't be able to tell," Gandy said.