Biogen share: Why the patience of the shareholders could break now

by Julia Groß, Euro am Sonntag

NJust under a year ago, the forecasts were skyrocketing: the US company Biogen could make between seven and 18 billion dollars a year with its Alzheimer’s drug Aduhelm, measured in terms of sales it would be the largest market launch of a drug of all time. Analysts estimated the fair value of Biogen shares to be between $435 and $470.

Investment bankers have rarely been that far off the mark. Aduhelm brought in a ridiculous three million dollars last year, Biogen’s price has roughly halved since US approval in June 2021 and is now just over $200. Europe and Japan flatly rejected the therapy. The company has lost its research chief and is in the process of laying off up to 1,000 of its nearly 10,000 employees. In short: For Biogen, it’s top of the line. If nothing significant changes in the earnings prospects, the company will have to fundamentally reposition itself, possibly even be broken up or sold.

Deadline on April 11th

The reason for the decline is the lack of coverage by Medicare, the US state health insurance for older citizens. Most Americans who would be eligible for treatment with Aduhelm are members. In January, a Medicare panel released a draft that says the insurance company will only pay for Aduhelm in placebo-controlled trials. This greatly narrows the circle of patients. The unusual measure is justified with the – quite justified – doubts about the effectiveness of Aduhelm.

The final decision, which will also apply to other drugs of the same class of active ingredients, is to be made by April 11th. In this respect, not only is Biogen’s future in the balance, the profit prospects of competitors such as Roche and Lilly also depend on the health insurance company’s assessment. Especially since private US health insurers joined the refusal attitude of Medicare – no wonder, since they can avoid enormous costs in this way.

The situation offers opportunities for risk-taking investors. First of all, there is the potential for Biogen itself: With the first Alzheimer’s drug approved for many years, the company can count on the support of influential patient organizations, no matter how controversial its effectiveness may be. Possibly Medicare will bow to their pressure and leave a back door open with the strict cost assumption rule. For example, the rapid expansion of the group of patients if confirmatory data from studies become known in the coming months. “If there are clearer signals or trends in this, the Center for Medicare & Medicaid Services will certainly be open to a revision of its assessment,” said Michael Li, portfolio manager of the American Century Advanced Medical Impact Fund (ISIN: IE 00B MH6 QG2 0).

If the restrictions remain, Biogen must act. The company has a well-stocked product pipeline. But the data on the drug candidates were recently mixed. New revenue streams are urgently needed as revenue from key drugs for spinal muscular atrophy and multiple sclerosis declines. Biogen could try to break free with an acquisition. The Americans have 4.7 billion dollars on the high edge, another 2.3 billion dollars are to come from the sale of the joint venture share to Samsung Biologics.

Another option with the potential for gains would be a board swap and a move away from the neurology-centric strategy that CEO Michel Vounatsos in particular has vehemently defended. “Up to now, the management has had surprisingly strong support from the shareholders. However, their patience could slowly wear out – or an activist investor could try to bring about changes,” says Christian Lach, Manager of the Bellevue Biotech Fund (ISIN: LU 041 539 224 9).

Successor with a head start

The final potential ace up Biogen’s sleeve is an Aduhelm-like product candidate the company is developing with Japan’s Eisai: lecanemab. Eisai plans to submit a US regulatory application for it in April or May. The cooperation partners would thus overtake the competitors Lilly and Roche, both of which are probably waiting for the results of more comprehensive studies. At Roche, these should come in the second half of the year, at Lilly in the first half of 2023.

The three drug candidates are similar molecules, but differ in nuances. All are antibodies that bind to amyloid-beta, the protein that builds up deposits in the brains of Alzheimer’s patients. The differences between the three (or four, if you count Aduhelm) antibodies lie in the binding sites and the preferred form of amyloid-beta. “Here Biogen and Eisai calculate advantages, because lecanemab targets a potentially particularly toxic form of amyloid beta,” says Christian Lach.

Patient benefit demanded

However, Lilly claims the same argument for herself – but for a different amyloid variant. This shows the gaps in knowledge that Alzheimer’s research is struggling with. After all, it has still not been proven whether the amyloid deposits are really the cause of dementia – and whether their removal can really help patients. In this respect, approval and blockbuster sales are ultimately waving for the company that can really prove that cognitive decline in patients is slowing down or stopped.

Roche certainly has a chance here with its extremely complex study program, even if analysts often rate the drug gantenerumab as the weakest candidate. Although Roche stocks are recommended, German investors have only been able to trade them at higher costs since 2019 due to the trading freeze for Swiss shares.

If none of the four products meet the requirements, investors will focus on alternative mechanisms of action. We present some small companies that are involved in other, highly speculative approaches in the Investor Info.

INVESTOR INFO

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Image Sources: Biogen Inc