Biogen and its partner, Japanese drugmaker Eisai, earlier this month received accelerated approval from the Food and Drug Administration for Leqembi, a monoclonal antibody to treat Alzheimer’s disease. Although Biogen shares are trading higher in the wake of this development, they are only up 4% or so year to date. To some degree, the modest gains are the result of a run-up in the stock ahead of the expected news. But some suspect bigger gains are in store for Biogen once Leqembi [lecanemab] clears other hurdles that still lie ahead. Leqembi, for example, still needs to receive the blessing of the Centers for Medicare and Medicaid Services. After all, the vast majority of patients with Alzheimer’s disease are Medicare recipients, and the CMS decision will determine if patients can receive coverage for the treatment, which is expected to be priced at $26,500 per year. Investors also want to see that patients are willing and able to undergo the treatment, which requires trips to an infusion center every two weeks, and periodic MRI scans to monitor the treatment’s impact. That could be a deal breaker for patients in rural areas without access to those tools. “Not all investors, as well as not necessarily all physicians, believe that the benefit [Biogen and Eisai] have shown in clinical trials is necessarily clinically meaningful,” said Marshall Gordon, a senior research analyst at ClearBridge Investments. “So people are waiting, and I think there’s some discount to the value of lecanemab in the stock, until we actually know what CMS is going to require.” Despite these obstacles, Biogen’s achievement has been seen as a positive in an area hungry for good news. Alzheimer’s is the most common form of dementia, but still isn’t fully understood. The Centers for Disease Control and Prevention estimates 5.8 million Americans were living with the disease in 2020. With an aging population, the agency predicts that number could nearly triple by 2060. “I think everybody in the Alzheimer’s field is looking for this to be a beginning … not the destination , but this is our first step towards it. It’s an important one,” Gordon said. Opportunity and skepticism Goldman Sachs analyst Salveen Richter has predicted that Leqembi could see peak global sales of $15.7 billion in 2035. RBC Capital Markets analysts forecast sales of $400 million by next year, climbing to $10 billion by 2031. Biogen and Eisai split profits for the drug equally. BIIB 6M mountain Biogen’s stock is trading well above its lows Leqembi treats Alzheimer’s disease by targeting amyloid-beta plaques in the brain. The sticky buildup of this protein is a hallmark of the memory- robbing neurodegenerative disorder. Researchers have theorized that the plaques hurt neurons in the brain. By removing or preventing them, the progression of the disease can be halted, the drugmakers say. But some skeptics note this is the same approach used by Biogen and Eisai’s earlier treatment, Aduhelm. That drug proved controversial as the benefits were minimal. There also was the potential for side effects that ranged from brain swelling and fluid buildup to bleeding in the brain. Ultimately, CMS refused to pay for Aduhelm, and it was a commercial flop. The clinical trial data for Leqembi has been much more convincing in demonstrating that it can arrest the disease. Patients who received the treatment showed a cognitive decline that was 27% slower over 18 months than those who weren’t treated. CMS is evaluating the data for Leqembi and may agree to cover the drug. The agency issued a statement that said it wants to see meaningful improvements in patients’ health, such as a slowing in cognitive decline in order to determine if the benefits of its use outweigh the risks. An endorsement from CMS would likely be a catalyst for Biogen. Still, investors should be aware that Biogen has a lot riding on the drug’s success. The company has seen declining sales for other drugs in its portfolio, and needs Leqembi to be a success. At the moment, the stock has an average rating of overweight, with a $322 average price target. That’s more than 11% above where the stock closed Friday. Attention shifts to Eli Lilly Shares of other Alzheimer’s drug developers have often mirrored Biogen’s moves. The group including Eli Lilly and Roche spiked in late September when Leqembi’s positive trial data was first revealed. Since then, Roche has suffered a setback with its Alzheimer’s treatment gantenerumab, while Lilly is forging ahead with its donanemab, which is nearing the end of a phase three trial. LLY 6M mountain Eli Lilly shares have pulled back from its recent highs Roche’s treatment targets a different part of the amyloid plaque, and the company was not able to show that cognitive decline slowed enough to be meaningful. The belief is that gantenerumab wasn’t able to clear the amyloid fast enough, which was encouraging for rival therapies that have been more successful in removing the buildups. Notably, patients in Roche’s study that saw greater plaque reductions did show greater signs of improvement, but those results weren’t statistically meaningful. Studies of Lilly’s donanemab have been more encouraging to date, and further data is expected in the second quarter of this year. SVB Securities analyst David Risinger said in a research note in mid-December that he was encouraged by the results from Biogen and Eisai and raised his odds for Lilly’s success to 60% from 40%. For investors, Lilly also has the advantage of a strong, diversified portfolio of drugs that includes a type 2 diabetes drug, Mounjaro, that could also become a blockbuster obesity treatment. Over the past year, Lilly shares have jumped 48%. Analysts’ average rating on Lilly is overweight, with a $389 price target, or more than 7% above where the shares closed Friday. Risinger’s price target on Lilly is above the consensus, at $410, implying a 13% gain from current levels, reflecting his expectations for progress on both donanemab and Mounjaro, plus a boost in sales of Lilly’s existing GLP-1 diabetes treatment, Trulicity. One possible advantage of Lilly’s Alzheimer’s therapy is that it is aimed at a once a month treatment versus the every other week dose required for Leqembi. William Blair analyst Myles Minter said Biogen and Eisai’s major competitor will likely be Lilly if it is successful in winning approval. Smaller drug developers Smaller Alzheimer’s drug developers have also been boosted by research developments. These include Prothena and Acumen Pharmaceuticals. Still in an early stage of its research, Prothena has acted as a proxy for developments in Alzheimer’s treatment. The company hopes to develop an antibody that can be given to patients at home via a subcutaneous injection rather than through an IV. That would be a big advantage for patients, according to Dan Lyons, a portfolio manager at Janus Henderson, which owns the stock. PRTA 6M mountain Prothena: Another way to play Alzheimer’s advances According to Janus, the approval of Biogen and Eisai’s therapy has helped other companies in the sector because it has established that the FDA believes safely clearing plaques from the brain provides a benefit to patients with Alzheimer’s . Cantor Fitzgerald has a $98 price target on Prothena, or about 66% above where the stock closed on Friday, and higher than the Street’s average target price of $86. Parallels with cancer treatment But the debate over the “amyloid hypothesis” rages, and it’s looking likely that stopping Alzheimer’s will require a combination of treatments. Agustin Mohedas, a research analyst at Janus Henderson, noted the parallels with cancer treatment. “We didn’t cure cancer in one go,” Mohedas said. He noted that early therapies showed some improvements for some patients, and that developments have since built on one another to the point that the American Cancer Society was able to report last week that the cancer mortality rate has dropped by nearly a third over the past three decades. “The people that kind of pooh-pooh the results as being modest just kind of lose sight of how drug development actually works,” he said. “It’s strange that … the first thing you find is a cure.” Meanwhile, other approaches are also being explored. Janus has invested in Lexeo Therapeutics, a privately held biotech that is working on developing a gene therapy for people who have two copies of the APOE4 gene. Having this pair of genes puts people at a significantly higher risk for Alzheimer’s, and their disease progresses at a faster pace. About 10% of patients with Alzheimer’s have this genetic marker. Lexeo’s research has been slow-going but initial studies have shown the treatment to be well tolerated. Patients who received it also have shown lower levels of both key Alzheimer’s markers, tau and amyloid. There are also therapies that focus on removing tau, or on neuroinflammation, but those studies have yet to demonstrate a benefit to patients. Over time, if the removal of tau is helpful, therapies could be developed that combine these approaches. While opinion remains split over the root cause of Alzheimer’s and how best to treat it, there is one thing that can’t be argued, Minter said. “We’ve never been able to offer this to our patients who have no hope,” he said. “… There is one thing we can guarantee is that you will get worse … if you don’t intervene.”
