The Food and Drug Administration has approved Biogen's (BIIB) Aduhelm, the first Alzheimer's drug to get the green light in 20 years. Goldman Sachs analyst Graig Suvannavejh views the news as having a positive read through to Alector (ALEC) and Athira Pharma (ATHA), who are also advancing Alzheimer's drugs but with different mechanisms of action, while Jefferies analyst Michael Yee told investors that he sees the approval as also "clearly a positive" for Prothena (PRTA).
ALZHEIMER'S DRUG APPROVAL: The FDA has approved Biogen's Aduhelm to treat patients with Alzheimer's disease. "Aduhelm is the first novel therapy approved for Alzheimer's disease since 2003. Perhaps more significantly, Aduhelm is the first treatment directed at the underlying pathophysiology of Alzheimer's disease, the presence of amyloid beta plaques in the brain. The clinical trials for Aduhelm were the first to show that a reduction in these plaques - a hallmark finding in the brain of patients with Alzheimer's - is expected to lead to a reduction in the clinical decline of this devastating form of dementia," the FDA said in a statement.
It added, "We ultimately decided to use the Accelerated Approval pathway - a pathway intended to provide earlier access to potentially valuable therapies for patients with serious diseases where there is an unmet need, and where there is an expectation of clinical benefit despite some residual uncertainty regarding that benefit. In determining that the application met the requirements for Accelerated Approval, the Agency concluded that the benefits of Aduhelm for patients with Alzheimer's disease outweighed the risks of the therapy."
The FDA also added that, "Additionally, FDA is requiring Biogen to conduct a post-approval clinical trial to verify the drug's clinical benefit. If the drug does not work as intended, we can take steps to remove it from the market. But hopefully, we will see further evidence of benefit in the clinical trial and as greater numbers of people receive Aduhelm. As an agency, we will also continue to work to foster drug development for this catastrophic disease."
Following the FDA's accelerated approval of Aduhelm, Biogen and the U.S. subsidiary of Eisai Co. (ESALY) announced that Biogen has established the price of Aduhelm based on "the overall value this treatment is expected to bring to patients, caregivers, and society, while reflecting key principles such as innovation, access and sustainability." The wholesale acquisition cost, or WAC, of Aduhelm, which is an infusion once every four weeks, is $4,312 per infusion for a patient of 74 kg-the average weight of a U.S. patient with mild cognitive impairment, or MCI, or mild dementia. The yearly cost at the maintenance dose, or 10 mg/kg, would be $56,000. The cost during the first year of treatment will be lower due to the titration period. "WAC is a list price and not the net price or the price paid by patients with insurance. The out-of-pocket cost for patients with insurance will vary depending on their coverage," Biogen said.
'BIG WIN': Stifel analyst Paul Matteis reiterated a Buy rating on Biogen shares following the FDA's decision. Approval based on amyloid plaque as a "surrogate" is "definitely unexpected" and appears to be a way for FDA to work around the contentious advisory committee meeting, Matteis argued, adding that the approval "is a big win." The analyst noted that how investors will risk-adjust revenues that are modeled after completion of a Phase 4 trial and how insurers will treat access for a drug approved based on a biomarker are "highly interesting" questions that will now "be debated at a materially higher stock valuation."
Meanwhile, Sandler analyst Christopher Raymond raised the firm's price target on Biogen to $384 from $260 but kept a Neutral rating on the shares. The analyst has long modeled approval, with worldwide end-user revenue of $8B by 2025. With a "broad label, despite the inconclusive clinical experience," this revenue trajectory is doable, Raymond said, adding that Aduhelm makes up $145 per share in the analyst's sum-of-the-parts analysis. The analyst also acknowledged that concerns among the medical community "run deep," but balancing this is the "huge" unmet need represented by Alzheimer's. He still prefers to the sidelines "until better visibility on the launch progress is attainable."
BofA analyst Geoff Meacham upgraded Biogen to Neutral from Underperform with a price target of $400, up from $235, stating that the accelerated approval of aducanumab was a surprise and admitting his "prior view was not correct." However, he still suspects the newly-named Aduhelm is "likely to disappoint commercially" and suspects the number of treated patients could easily fall short of consensus 2021 forecasts of 19,000 and 161,000 patients in 2021 and 2023, respectively. For beta-amyloid antibodies broadly, aducanumab's approval likely means that there is a path for approval of "many sub-optimal therapies with a positive imaging trend but uncertain clinical benefit," which should open the door for Eli Lilly (LLY), Roche (RHHBY), Johnson & Johnson (JNJ), and Pfizer (PFE), among others, Meacham added.
POSITIVE FOR ALECTOR, ATHIRA, PROTHENA: Goldman Sachs analyst Graig Suvannavejh views Monday's news as "widely supportive" for all companies working in the Alzheimer's therapeutics space. Further, he sees the FDA's approval of the now-known Aduhelm as de-risking for MorphoSys (MOR) gantenerumab, which he noted is also an anti-amyloid antibody. Though Athira Pharma and Alector are advancing Alzheimer's drugs with different mechanisms of action, Suvannavejh also sees positive read-throughs as he believes the supportive position by FDA on Biogen's drug reflects the agency's desire to see more treatments for AD in the hands of patients and physicians. The analyst reiterated Buy ratings on both Alector and Athira with price targets of $29 and $45, respectively.
In a research note of his own, Jefferies analyst Andrew Tsai said news of Biogen being granted FDA approval for aducanumab is likely to spark investor enthusiasm across all Alzheimer's names and he believes the longer-term setup for Athira Pharma looks more attractive now. Given what he views as "the FDA tailwind," he would buy on strength as he believes the FDA's aducanumab decision "clearly has a positive readthrough" to Athira, whose Phase I data suggests ATHA-1017 could produce "a profound cognitive benefit" in Phase 2/3 studies expected to read out in 2022. In that context, Tsai thinks a 25%-50% short-term move for Athira shares "seems reasonable" relative to the company's current market cap. Tsai maintains a Buy rating on Athira.
Also commenting on the news, Jefferies analyst Michael Yee highlighted that the FDA approved Biogen's Alzheimer's drug aducanumab via an accelerated approval on the surrogate endpoint of reduction of amyloid beta plaque, a lower hurdle versus showing specific clear cognitive benefit. This suggests the possibility of other antibodies with similar mechanism of action and "higher optionality" pursing approval, including Prothena's "10-times more potent" Abeta antibody PRX012 and the rest of its broader neuro pipeline, the analyst contended. Yee views the news as "clearly a positive" for Prothena, keeping a Buy rating on the shares with a $38 price target.
PRICE ACTION: In Monday afternoon trading, shares of Biogen have jumped about 44% to $410.74, while the shares of the company's partner, the Japanese drugmarker Eisai, have soared over 73% to $128.50 in New York trading. The news sent shares of other biotech companies developing drugs to treat Alzheimer's disease, like Eli Lilly (LLY), higher as well. The latter's stock has advanced about 14% to $230.05. Meanwhile, Athira has gained over 13% to $22.64, Alec has advanced almost 10% to $21.48, and Prothena has risen over 17% to $33.59.