Shares of Biogen (BIIB) plunged after the drugmaker and its partner discontinued late-stage trials of an Alzheimer's treatment. The discontinuation comes after an independent data monitoring committee said the treatment was unlikely to meet its primary goal.
BIOGEN, EISAI TO DISCONTINUE PHASE 3 TRIALS: Biogen on Thursday said it would discontinue the ENGAGE and EMERGE global Phase 3 trials designed to evaluate the efficacy and safety of aducanumab in patients with mild cognitive impairment due to Alzheimer's disease and mild Alzheimer's disease dementia. Biogen was developing the drug in partnership with Japan's Eisai (ESALY).
The company said in a statement that the decision to stop the phase 3 trial is based on an independent data monitoring committee's analysis showing that the trials were unlikely to "meet their primary endpoint." The recommendation to stop the studies was not based on safety concerns, Biogen said.
Data from the ENGAGE and EMERGE studies will be presented at future medical meetings to inform ongoing research. Biogen and Eisai have worked together on the treatment since October 2017, the companies said. The trials were supposed to evaluate the treatment for people who had mild Alzheimer's disease dementia and people with mild cognitive impairment as a result of Alzheimer's. As part of this decision, Biogen and Eisai said they would also end a Phase 2 safety study and the extension of a Phase1b study for the treatment. They will decide whether to initiate a Phase 3 secondary prevention trial for the treatment, they said, after continuing to look at data.
"This disappointing news confirms the complexity of treating Alzheimer's disease and the need to further advance knowledge in neuroscience," Biogen Chief Executive Officer Michel Vounatsos said in a statement. "We are incredibly grateful to all the Alzheimer's disease patients, their families and the investigators who participated in the trials and contributed greatly to this research."
The treatment had previously been given fast-track designation from the U.S. Food and Drug Administration.
WHAT'S NOTABLE: Biogen and Eisai are not alone in struggling to find effective treatments for Alzheimer's. Last June, Eli Lilly (LLY) and AstraZeneca (AZN) ended two trials for lanabecestat, an experimental Alzheimer's drug they were developing, after a committee found those trials also would not achieve their goals. Earlier in 2018, Pfizer (PFE) said it would stop trying to fund new drugs to treat Alzheimer's and Parkinson's disease.
'TRANSFORMATIVE FAILURE': RBC Capital analyst Brian Abrahams says Biogen's discontinuation of the Alzheimer's studies is a "transformative failure" for the company's pipeline, and believes the elimination of all Alzheimer's revenues and the reduced terminal growth rate would reduce the stock's discounted cash flow valuation to $240 per share from $318 per share. The failure will likely expose the "significant risks" to Biogen's base multiple sclerosis business and spinal muscular atrophy franchise, said Abrahams. On the flip side, the analyst expects smid-cap companies in the neuro space that are viewed as possible acquisitions targets for Biogen will likely trade up on today's news.
Stifel analyst Paul Matteis said he expects Biogen shares to trade "meaningfully lower" on Thursday following the news, potentially around 30%, to trade down to the $200-$240 per share range. His view of the potential move down in the stock is influenced by his contention that the stock will price in very little pipeline value beyond a few Ionis programs, Matteis noted. The analyst, who sees it as "feasible" that 2020 becomes the peak revenue year in consensus estimates, expects the new debate on the stock to become "Is Biogen a buyer or a seller?" While removing aducanumab from a sum-of-the-parts analysis takes $70 per share from the stock, a more sizeable downward price target revision is appropriate as aducanumab "also served as a bit of a counter-weight to competitive threats and concerns elsewhere in the portfolio," Piper Jaffray analyst Christopher Raymond told investors in a research note titled "That's Going to Leave a Mark." Baird analyst Brian Skorney said he believes the big question now is, "where is the backstop?" Biogen, without the upside potential of Alzheimer's, looks a lot like Celgene (CELG) circa 2018, Skorney contended. He thinks investors "will have a hard time seeing anything but risk."
Biogen was downgraded this morning at BofA Merrill Lynch, Wells Fargo, William Blair and Atlantic Equities.
PRICE ACTION: In early trading, shares of Biogen are down 28% to $230.92.
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