Biogen Alzheimer's drug may be 'first effort of a clear win': Analyst

Baird Senior Research Analyst Brian Skorney joins Yahoo Finance Live to discuss the breakthrough of Biogen's Alzheimer's drug, which is pushing the stock higher.

Video transcript

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DAVID BRIGGS: Shares of Biogen soaring today on news of a major breakthrough regarding Alzheimer's treatment. A monoclonal antibody treatment slows the progression of cognitive decline by 27% compared with the placebo in stage III trials. Baird Senior Research Analyst Brian Skorney is upgrading Biogen. He joins us now.

Brian, good to see you. This is major news. How significant is it for Biogen and for, frankly, Alzheimer's treatment around the world?

BRIAN SKORNEY: Yeah. so I think it's a very big deal for Biogen. Certainly, it drives my upgrade here. I think there's a lot of upside surprises beyond just the fact that it hit. I think the robustness of the data is a very positive thing. I think they've had a lot of controversy with their last Alzheimer's drug, which was approved, not reimbursed by CMS, certainly sort of collapsed commercially.

I think a lot of the issues they had with that drug are fixed with this data today. And I think that's going to wind up being meaningful for a company that, frankly, has sort of lost the faith of the investor base. And I think this will help rejuvenate it. And I think even still, the reaction, while it's a big reaction today, I think really understates the opportunity that they have before them.

What it means for Alzheimer's people, in general, you know, I'd say, look, I think this is a great first effort at seeing a clear win on something that's disease modifying. I think you'll hear from the neurology community this is not a home run. This is not an amazing huge benefit, certainly not a cure. But it's a beginning, and I think that will be important. And I think we'll see a lot of Alzheimer's patients wind up coming onto a treatment like this in the coming years.

SEANA SMITH: Brian, what's your sense of whether or not this has, I guess, a likelihood that this becomes a multibillion dollar blockbuster drug, potentially?

BRIAN SKORNEY: Yeah, I think it's a pretty high likelihood. You know, I think the early Alzheimer's disease patient population in the United States is very big. We're talking hundreds of thousands to millions of patients who could potentially benefit from this.

There's really nothing that's ever been shown to slow the progression of the disease before, certainly not as robustly as this has in a clinical data set. So I do think it's certainly a blockbuster. I think the debate really will hinge on the magnitude of how much of a blockbuster is it going to be and how much do competitive assets come into the market, too, and sort of impede on market share.

RACHELLE AKUFFO: And we know there were some commercial issues tied to this development, though. But do you feel like all those issues have been resolved now? And what does this mean, perhaps other biopharma companies who are also in this space?

BRIAN SKORNEY: Yeah. So I think-- I think it resolves a lot. So I think when you look at the commercial issues that they've had with Aduhelm, it was really because there was not a data set that they had for that drug that showed clear clinical efficacy. It was approved very controversially by the FDA. The advisory committee who reviewed it took significant issue with the data, overwhelmingly voted against approving it because the clinical efficacy was there.

And the FDA wound up approving it not on clinical efficacy, but on a surrogate biomarker of plaque reduction. And what that led to is CMS had a national coverage determination-- so most of these patients are Medicare patients. They're in that age group, so Medicare reimbursement is a big deal.

CMS determined that it was not medically necessarily, largely because, again, it was only approved on this reduction of beta amyloid plaque. It wasn't approved on any sort of clinical efficacy. And CMS outlined that in their national coverage determination.

I think for this drug, you have very clear signs of clinical efficacy. This hits the standard end point of substantial evidence of efficacy on a clinically meaningful endpoint, that is, the measurement CDR Sum of the Boxes here. So I think a lot of those issues dissipate because before, we didn't really know if the drug worked or not.

This drug is different. I think we know now, with a high degree of confidence, that it's doing something, that there is a clinical benefit to lecanemab. And I think when you have that knowledge, it makes some of the commercial issues dissipate.

DAVID BRIGGS: Eli Lilly popped 7 and 1/2% on this news. What does it mean for them and others doing similar things, similar treatments in the space?

BRIAN SKORNEY: Sure. So I think that's a point of great debate. Certainly, there's sort of a camp of people who are beta amyloid bulls and beta amyloid bears. And there's been a ton of controversy over the last 30 years as to whether or not intervening by hitting this target does anything of clinical benefit. And prior to today, I would say I was kind of in the bear camp there to say it's really not convincing that it does.

I think you shift that perspective here to say, well, it's at least-- it's definitively a win for the beta amyloid bull camp. We have now demonstrated that in a phase III. But, again, the magnitude of benefit is not huge here. We have seen very ambiguous data from a lot of other studies with this target. So I don't-- I would be a little cautious on overinterpreting what it means for other drugs that are not this drug.

Lecanemab is its own drug. It does things that are different than Lilly's donanemab, than Roche's gantenerumab, and Biogen's own aducanumab. So I would definitely be cautious to say, oh, well, because this worked, everything else worked. There's certainly risk that we don't see consistency across the additional phase III studies that we're going to get over the next year or so.

SEANA SMITH: Brian, what do we know about the cost, potentially, of this drug?

BRIAN SKORNEY: So cost is going to be a-- a big question mark. When Biogen came out with their initial cost of Aduhelm, which was about $50,000, there was mass criticism. I mean, everyone thought it was a terrible idea. The Street-- no one on the Street was really modeling that high of a cost to begin with. Given the absence of real clinical efficacy, the question of whether that's a justifiable cost was really an issue.

And I think it was a major misstep by Biogen management to do it. The flip side is from the Eisai perspective here. And Eisai is in charge of this launch while Biogen gets 50% of the profits from this launch. They're actually-- the misstep by Biogen management may benefit Eisai. So Eisai can come in here, I think, I hope, at a much lower cost, call it $25,000 a year, which is where I think most people on the Street thought Aduhelm was going to come in at.

And even though that's still a pretty high price, they kind of look heroic relative to where Biogen put it. So I think a 20-ish thousand dollar per year cost is much more reasonable. And if they come in here, I think that's going to be much more warmly received than Aduhelm's price at sort of the $50,000 threshold was.

RACHELLE AKUFFO: Well, certainly promising development so far. Brian Skorney, thank you so much for joining us this afternoon.