Biogen’s $11 bln Alzheimer’s gain has cushion

A test tube is seen in front of displayed Biogen logo in this illustration taken, December 1, 2021.

NEW YORK, Sept 28 (Reuters Breakingviews) - An effective treatment for Alzheimer’s disease has long been the holy grail for drug companies. The $11 billion pop in Biogen’s (BIIB.O) market capitalization on Wednesday morning looks impressive but implies some skepticism that Japan’s Eisai (4523.T), and its partner Biogen, have found it.

The two companies said Tuesday night their drug candidate, lecanemab, delayed cognitive decline in a trial of about 1,800 patients in the early stage of the disease, and prolonged progression of the disease at 18 months by 27% compared to the placebo using a scale quantifying the severity of symptoms in six areas.

There is further testing to come. Doctors will argue whether this slowdown is clinically meaningful to patients, or whether it’s even real, as measuring the disease’s progress is difficult. What’s obvious, though, is that if it works, investors are penciling in sales assumptions that aren’t crazy.

Biogen’s $11 billion gain in market capitalization implies roughly $6.5 billion of sales in five years, assuming revenue split between the two companies, discounted at a rate of 10%, and valued on the same enterprise value-to-sales multiple as Amgen , about five times. That seems conservative. If the drug is priced at $20,000 a patient annually after discounts, it implies around 330,000 take it. That’s less than a quarter of the 1.5 million Americans with early-stage Alzheimer’s. Considering the disease affects far more people globally and there are no effective treatments, this seems like a low bar.

Decades of failure to find a cure explain why investors are gun-shy. A 2014 study in the journal Alzheimer’s Research and Therapy showed that 99.6% of drugs tested between 2002 and 2012 failed to help patients, and the following decade was more of the same. Even Aduhelm, a drug developed by Eisai and Biogen and approved last year, was a commercial disappointment, as the U.S. government put strict limits on paying for it, given little proof the drug actually benefited patients.

Lecanemab still has hurdles. But the number of Alzheimer’s patients will rise substantially in future years, and the drug’s appearance of efficacy – assuming the underlying data back up what the companies said Tuesday – means it will probably be reimbursed by insurers and governments. This may mean opportunity for investors bold enough to bet on Biogen.

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Japanese pharmaceutical company Eisai and its U.S. peer Biogen said on Sept. 27 a drug they were developing for the treatment of Alzheimer’s effectively slowed cognitive decline in a trial of about 1,800 patients in the early stages of the disease.

The drug, lecanemab, slowed the progression of the disease at 18 months by 27% compared to the placebo, using a numeric scale that quantifies the severity of symptoms. Eisai will present the study’s results in late November and said it will publish the results in a peer-reviewed journal.

Eisai plans to seek U.S. Food and Drug Agency approval based on the study, and a decision could come in January under the accelerated approval pathway.

Editing by Lauren Silva Laughlin and Amanda Gomez

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