Biogen (BIIB 232.23, -88.36, -27.56%) shares are getting crushed after the
company, along with Eisai,
Co., Ltd., discontinued its Phase 3 trials of Aducanumab in patients with
Alzheimer's Disease (AD). This comes after an independent data monitoring committee
released analysis that suggested poor efficacy. This issue accounts for a nearly $17 bln loss in market value for
the now $46 bln biotech company.
This failure does not come has a big surprise to most experts because Aducanumab is the same type of drug (targeting the beta-amyloid protein) that has failed to yield positive results in AD by numerous biopharma companies in the past (Eli Lilly, Pfizer, and Merck have all abandoned this approach over the years). Biogen stock surged some 25% last July when seemingly positive Phase 2 data for the drug gave investors hope.
With a $2 bln valuation for its differentiated but very early neuroscience pipeline, Denali Therapeutics (DNLI) already seems to exhibit a healthy premium as investors and humanity hope to make progress Alzheimer's.
This is just the latest setback in the medical field for Alzheimer's Alzheimer's is a holy grail of sorts in biopharma due to the lack of progress, its debilitating, drawn out symptoms, and its huge cost on the medical system.
Nearly two-thirds of revenue comes from its multiple sclerosis franchise, which is stable with minimal growth. Last year, Sanofi (SNY) acquired Bioverativv, the hemophilia franchise Biogen spun off, in 2017 for almost $12 bln.
This failure means that Biogen will likely have to cut costs and be even more dependent on business development (acquisitions) to enhance its growth profile. Two weeks ago, the company acquired Nightstar Therapeutics (NITE) in an $800 mln deal for NITE’s retinal gene therapy pipeline.
Biogen shares were already trading at 11x EPS for 2019 or 8x EV/EBITDA coming into today, and now trade at ~8x EPS or 6x EV/EBITDA, making it one of the cheapest large cap biopharma stocks which is also starved for growth.