Biogen (BIIB) followed up the good news it announced with partner Eisai about their Alzheimer’s disease (AD) drug lecanemab with a stock surge that sent shares zooming 40% on Wednesday, from $197.79 to $276.61. (Investors took some profits early Thursday, sending the share slipping nearly 3% to $269.44 as of 12 pm ET).

Biogen and Eisai said Tuesday evening that lecanemab aced their confirmatory Phase III Clarity AD trial (NCT03887455) by achieving the study’s primary endpoint of statistically significant reduction in the Clinical Dementia Rating-Sum of Boxes (CDR-SB) at 18 months compared to placebo.

Lecanemab treatment reduced clinical decline on CDR-SB by 27% (-0.45, p=0.00005) in the study, which enrolled 1,795 patients with early AD—of which about 25% of the roughly 1,030 U.S. patients were Hispanic or African American. “Starting as early as six months, across all time points, the treatment showed highly statistically significant changes in CDR-SB from baseline compared to placebo,” Biogen stated.

Lecanemab also met all of the study’s key secondary endpoints with highly statistically significant results, the companies added–including the change from baseline at 18 months compared with placebo of treatment in amyloid levels in the brain measured by amyloid positron emission tomography (PET); the AD Assessment Scale-cognitive subscale14 (ADAS-cog14); AD Composite Score (ADCOMS); and the AD Cooperative Study-Activities of Daily Living Scale for Mild Cognitive Impairment (ADCS MCI-ADL).

“We expect that these positive results will reinvigorate the AD space,” declared Mark Goodman, Senior Managing Director, Neuroscience, and a senior research analyst with SVB Securities, in a research note. “We believe the positive Phase 3 CLARITY AD data are sufficient to support traditional approval of lecanemab given the highly significant and consistent results.”

Eisai said it will present detailed results from Clarity AD on November 29 at the Clinical Trials on Alzheimer’s Congress (CTAD), and publish the findings in a peer-reviewed medical journal.

Baird Senior Research Analyst Brian P. Skorney, CFA, upgraded Biogen’s shares from Market Perform to Outperform and raised the firm’s target price on shares from $224 to $340 a share, citing lecanumab’s Phase III success.

We think the reported data is pretty much a best-case scenario that not only should lead to approval and reimbursement but could make it challenging for competition (assuming any are successful) to match,” Skorney wrote in a research note.

$8B in projected sales

Based on that expected dearth of competition, Skorney has projected $8 billion in peak annual sales for lecanemab.

He also said the 0.45 separation between lecanumab and placebo on CDR-SB shown in the announced data “in and of itself, is a negligible effect that would not be observable in an individual person,” before adding: “However, the selling point of disease modification is that the effect gets compounded over time.”

As a result, the separation seen over 18 months would double to a difference of 1.5 over three years.

“The combination of removing the pathological feature of AD AND clear evidence of a continued slowing of progression is a powerful combo, despite the measured effect size,” Skorney added.

Biogen and Eisai have submitted a Biologics License Application (BLA) for lecanumab to the FDA, which accepted it under its accelerated approval pathway and granted Priority Review. The agency has set a target decision date under the Prescription Drugs User Fee Act (PDUFA) of January 6, 2023, with results from CLARITY AD usable as a confirmatory study to verify the clinical benefit of lecanemab.

Lecanemab (formerly BAN2401) is an anti-amyloid beta (Aβ) protofibril antibody designed to treat mild cognitive impairment (MCI) due to AD and mild AD (collectively called “early AD”) with a confirmed presence of amyloid pathology in the brain.

Goodman added that the positive results for lecanemab will heighten investor interest in upcoming data from studies of two other monoclonal antibody candidates designed to fight AD by targeting Aβ—the GRADUATE 1 (NCT03444870) and GRADUATE 2 (NCT03443973) trials assessing Roche’s gantenerumab, expected to read out data during the fourth quarter; and the TRAILBLAZER ALZ-2 (NCT04437511) trial evaluating Eli Lilly’s donanemab, set for the first half of 2023.

Lecanemab, gantenerumab, and donenemab are outliers in a universe of Alzheimer’s drug candidates since three-fourths of them are designed to fight the disease by focusing on non-amyloid and non-tau targets according to the Alzheimer’s Drug Discovery Foundation (ADDF)’s Clinical Trials Report.

“The combination of the biomarker change—reduced amyloid—plus slowing of cognitive decline in this study is encouraging news for the 57 million patients around the world living with Alzheimer’s,” stated Howard Fillit, MD, Co-Founder and Chief Science Officer at the ADDF. “However, amyloid-clearing drugs will provide an incremental benefit at best and there is still a pressing need for the next generation of drugs focused on other targets based on our knowledge of the biology of aging. We are optimistic about the future as many of these drugs are in development, with 75% of drugs in the pipeline now targeting non amyloid pathways of neurodegeneration.”

The 7:30 pm ET timing of Biogen/Eisai’s announcement translated to 8:30 am in Tokyo—a half-hour before the opening bell of the Tokyo Stock Exchange, where Eisai trades its shares. Those shares jumped 17% or ¥1,000 ($6.93) on Wednesday, to ¥6,784 ($47.06). Morgan Stanley upgraded Eisai shares from “Underweight” to “Equal Weight.”  (Eisai shares continued their climb on Thursday, rising roughly 14% to close at ¥7,704 ($53.38).

Biogen’s stock spike was the biggest one-day surge in the company’s stock since June 2021, the last time it shared good news about one of its Alzheimer’s drugs—in that case, the FDA’s accelerated approval of Aduhelm (aducanumab), also co-developed with Eisai.

Controversial approval

The Aduhelm approval turned out to be controversial since the FDA rejected the advice of an advisory committee that recommended against approving the drug—and appeared to act in response to contact from representatives of Biogen during the review process for Aduhelm, “including some that may have occurred outside of the formal correspondence process,” then-Acting FDA Commissioner Janet Woodcock, MD, said last year.

Woodcock alluded to a reported “‘off-the-books’ meeting” in May 2019 between Biogen’s since-retired CSO, Alfred Sandrock Jr., MD, PhD, and Billy Dunn, MD, director of the FDA’s Office of Neuroscience. The meeting marked the start of efforts by Biogen to persuade the FDA to approve Aduhelm, two months after announcing the failure of two Phase III studies of the drug in March 2019—which led to a 30% drop in Biogen’s stock price that wiped out $16 billion of market value.

Yee noted that Aduhelm won approval despite reducing clinical decline on CDR-SB by just 0.4, half a point lower than lecanemab. He cited an interview with an unnamed “well-known Alzheimer’s KOL [key opinion leader]: “Even a pessimistic doctor said half a point [improvement] is okay,” Yee observed, adding: “He too would not stop patients from using the drug if they request it and if it’s reimbursed.”

In March, Biogen obtained sole decision-making authority over the development, commercialization and manufacturing of Aduhelm when Eisai gave up sharing global profits in favor of a global royalty arrangement starting at 2% and reaching 8% when annual sales exceed $1 billion. Two days later, Biogen trumpeted positive 128-week data that lifted shares 8%.

By contrast, Biogen and Eisai will split profits 50-50 from lecanemab.

Skorney also predicted the Centers for Medicare and Medicaid Services (CMS) will ultimately grant coverage to lecanemab, if not other Aβ-targeting Alzheimer’s drugs: “We believe it will be hard for CMS to dig in and refuse coverage of lecanemab, specifically, but this may not lead to a broad ‘class-wide’ change.”

That would contrast with Aduhelm, where CMS in April issued a National Coverage Determination limiting coverage of that and other amyloid-beta targeting Alzheimer’s disease therapies receiving accelerated approval to those in FDA- of NIH-approved clinical trials. “This unprecedented CMS decision effectively denies all Medicare beneficiaries access to Aduhelm,” Biogen CEO Michel Vounatsos fumed.

The lack of CMS coverage is a key reason why Aduhelm sales have failed to match once-lofty expectations. During the first half of this year, Aduhelm generated only $2.9 million in sales, all of it in the U.S—up from $1.6 million in January-June 2021.

“We predict reimbursement [for lecanemab] will have to get set away because the results are clearly positive and we predict multiple drugs will be positive and CMS will not be able to stop all these drugs from getting reimbursed,” Yee of Jefferies added.

Aduhelm’s troubles took a toll on Vounatsos’ tenure at Biogen’s helm. He announced announced in May that he will step down as CEO after six years, as part of Biogen’s second cost-cutting restructuring in five months. Vounatsos will exit when the company names a new CEO—something Goodman said can be expected “in the next few months.”

The restructuring includes Biogen “substantially” eliminating its commercial infrastructure supporting Aduhelm, and retaining “minimal” resources to manage patient access programs, including a continued free drug program for patients currently being treated with Aduhelm in the U.S. Biogen recorded a second quarter GAAP restructuring expense of $71 million related to the elimination of commercial infrastructure for Aduhelm.

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