Biogen's Alzheimer's Drug Doesn't Win Committee Support

We're lowering our fair value estimate for Biogen BIIB from $354 to $346 following a Food and Drug Administration advisory committee meeting that was highly skeptical of Biogen's regulatory filing for Alzheimer's disease drug candidate aducanumab. The sentiment of the committee, evidenced in their discussion and several votes throughout the Nov. 6 meeting, appears to run counter to the Food and Drug Administration's stated position in briefing documents released on Nov. 4. While trading in Biogen shares was halted on Friday during the meeting, we expect shares to decline significantly when trading resumes on Monday. Following the largely positive briefing documents and largely negative committee meeting, we continue to assume a 40% probability of approval for aducanumab, but we now expect the FDA will require another phase 3 study before approving aducanumab. Assuming Biogen could initiate such a study in 2021, we would expect the firm could have data by the end of 2023, with potential approval in 2024. This results in sales climbing as high as $6 billion, if approved, by 2029. We don't think Biogen's wide moat hangs in the balance, as this is supported by a diverse multiple sclerosis portfolio, newer drug Spinraza, a growing biosimilar portfolio, and a deep pipeline in neurodegenerative diseases.

Despite the sharply negative vote, the FDA could still approve the drug on schedule (by March 2021) if they opt to require an additional study to be conducted post-approval. Even though the gold standard for an application for approval of an Alzheimer's drug is two large efficacy studies, the FDA has previously shown some flexibility with other approvals in neurology, particularly when unmet need is high and other supportive evidence exists. That said, Alzheimer's disease affects millions of patients, and widespread use of an ineffective therapy would be costly on many levels. Approving a drug despite such strong dissent from the committee seems difficult to support.

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