BIIB - Biogen: Leqembi Could Boost Prospects Until Acquisition Comes Into Play

2023-09-05 08:27:58 ET

Summary

• Biogen receives FDA approval for Leqembi, a treatment for Alzheimer's Disease, providing a large market opportunity.
• Biogen's acquisition of Reata Pharmaceuticals brings the potential for significant sales growth with SKYCLARYS, a drug for Friedreich's Ataxia.
• Biogen's pipeline includes Cemdomespib, a potential treatment for diabetic peripheral neuropathy, offering another large market opportunity.

Biogen (BIIB) had made great progress in being able to achieve significant wins for its pipeline. The first of which involves the FDA approval it had received for Leqembi, which was approved for the treatment of patients with Alzheimer's Disease. The thing is that while sales of this drug will need to ramp up, there is another way this company can generate growth and that would be with its acquisition of Reata Pharmaceuticals. The addition of Reata brings on board a new drug known as SKYCLARYS, which was approved by the FDA for the treatment of patients with Friedreich's Ataxia [FA]. This will give Biogen the opportunity to build up sales of this drug until Leqembi sales can start to accelerate as well. The acquisition also brought on board a phase 2 asset by the name of Cemdomespib which is expected to be advanced for the treatment of patients with diabetic peripheral neuropathy. Even though this program is only in mid-stage testing, it provides another possible large market opportunity for Biogen. The purchase of Reata with SKYCLARYS is good enough to drive the stock higher, but what will make the purchase even more worth it is if Cemdomespib is ultimately approved, because that would bring in even more revenue for the company.

FDA Approval Of Leqembi Will Start To Boost Shareholder Value

Biogen and its partner Eisai were able to convert FDA Accelerated Approval of Leqembi for Alzheimer's Disease to full Approval. The ability to do so was because a positive outcome in terms of benefit was observed in a confirmatory study known as 301. A total of 1,795 patients were recruited into this study and then randomized 1:1 to receive either 10 mg/kg Leqembi or placebo. It was noted that the primary endpoint was met, which was to achieve a statistically significant decline from baseline to 18 months of the Clinical Dementia Rating Scale Sum of Boxes score. It remains to be seen how well this drug does on the market, but it is a large market opportunity nonetheless. It is expected that the global Alzheimer's Disease market could reach $15.3 billion by 2029 . This is a huge market opportunity for sure, but can it capture it? I believe that it can. While it will take time for sales to start to ramp up in the first year, there is something that is going to give it a much needed boost. It was said that the Centers for Medicare and Medicaid Services would broaden coverage of Leqembi if full approval is achieved . This means with Medicare helping patients to pay the cost, it will be a win for both the patients and for Biogen.

Reata Purchase Adds Significant Value

While it will take time for Leqembi sales to build, there is another product in the pipeline which could end up seeing a huge growth in terms of sales and this would be SKYCLARYS. That's because Biogen spent $6.5 billion to acquire Reata Pharmaceuticals . This purchase was the right move in my opinion. Why is that? That's because SKYCLARYS has already been approved by the FDA for the treatment of patients with Friedreich's Ataxia. It is said that sales of SKYCLARYS could reach $1.3 billion by 2029. This does make sense, because the drug is priced at $370,000 annually. I believe that there is an even better opportunity for Biogen and that would be if it can successfully advance the other drug as part of the acquisition, which is Cemdomespib. This particular drug is being developed for the treatment of patients with diabetic peripheral neuropathy. It is projected that the global diabetes market could reach $78.26 billion by the end of 2026 . This is a large market opportunity, but what could the market for this look like when only looking at those with peripheral neuropathy? It is said that about 41% of patients with diabetes have peripheral neuropathy at 10 years . Thus, even if only eventually accounting for 41$ of the entire diabetes population, this is still a huge market for Biogen to go after. Of course, it remains to be seen if the phase 2 study is ultimately successful. The ability to possibly tap into this large market is huge and thus why this program needs to be advanced as quickly as possible.

Financials

According to the 10-Q SEC Filing , Biogen had $7.28 billion in cash as of June 30, 2023. The thing about this company is that it is already generating revenue from many of the approved drugs it has. The best seller in the most recently reported Q2 of 2023 would be TYSABRI, which is part of its Multiple Sclerosis [MS] franchise. It generated total sales of $483.1 million during the second quarter. Its overall MS franchise continues to hold strong for now, but may ultimately fall into trouble when it comes to generics starting to be sold. Such generics are likely to slowly erode the MS Franchise as time goes on. The good thing is that it has several other large market opportunities to go after. Lastly, even though it spent $6.5 billion to acquire REATA, it still has enough cash for other acquisitions to bolster its pipeline.

Risks To Business

There are several risks that investors should be aware of before investing in this biotech. The first risk to consider would be with respect to Leqembi for Alzheimer's Disease [AD]. Even though this drug was given full approval by the FDA, plus Medicare covering the costs for patients, it doesn't mean that sales will be very good. A second risk to consider would be with respect to Biogen now being able to sell SKYCLARYS. There is no assurance that sales of this drug will start to ramp up quickly. A third risk to consider would be with respect to what I described above with respect to Cemdomespib, which is being developed for the treatment of patients with diabetic peripheral neuropathy. This is only in mid-stage testing and there is no guarantee that positive results will be achieved upon completion, nor that it will ultimately be moved forward into phase 3 testing. A fourth risk to consider would be with respect to Tysabri and an incoming biosimilar. That is, Novartis ( NVS ) received FDA approval of Tyruko , which is the first U.S. biosimilar to treat multiple sclerosis. In addition, this biosimilar has also been approved for the other indications as well like Tysabri, such as: Relapsing MS and Crohn's Disease.

Conclusion

Biogen had made great progress to advance its pipeline. That's because it has already been able to generate two events to boost shareholder value in the coming years. The first was to receive full FDA approval of Leqembi and the second was to acquire Reata Pharmaceuticals. Leqembi brings about a possible Alzheimer's Disease market, which could reach $15.3 billion by 2029. The acquisition of Reata brings additional rare disease drugs into Biogen's pipeline. Many of which could also help generate billions of dollars in sales. Lastly, there is another positive development that Biogen achieved with partner Sage Therapeutics ( SAGE ). That is, they both were able to achieve FDA approval of Zurzuvae for the treatment of women with postpartum depression [PPD]. Both companies were also looking to receive FDA approval of Zurzuvae for the treatment of patients with Major Depressive Disorder [MDD], but were not able to obtain it from the FDA. Still, it is not a huge loss as the PPD market is still a large one. It is said that the global postpartum depression market is expected to reach $42.37 billion by 2030 . This is another large market opportunity and thus another target indication that could bring in substantial revenue for Biogen.

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