Biogen Gained $1 Billion Overnight After Becoming Goldman Sachs' Favorite Biotech

Published: Aug 17, 2017

Biogen Gained $1 Billion Overnight After Becoming Goldman Sachs' Favorite Biotech August 17, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Goldman Sachs added Cambridge, Mass.-based Biogen to its Equity Conviction List, basically a strong recommendation to investors. Investors took them up on the recommendation, with company shares gaining more than $1 billion in market value yesterday.

Why? What’s new about Biogen?

In fact, not much. Two Goldman Sachs analysts, Terence Flynn and Cameron Bradshaw wrote a research note to clients, noting the addition to the list. Their primary reason for doing so is Biogen’s pipeline drug for Alzheimer’s disease, aducanumab.

What is a bit unusual here is that there’s no news recently, or even expected soon, about aducanumab. The drug is currently in Phase III clinical trials, and a readout isn’t expected until 2019 at the earliest, with 2020 being more likely.

The analysts’ focus on Biogen and aducanumab has more to do with the fact that Biogen’s aducanumab is likely the best hope for an effective Alzheimer’s drug, which isn’t saying much. Flynn and Bradshaw give it a 50/50 shot at approval, and many analysts think that’s wildly generous.

In December 2016, Biogen released early data from its Phase Ib trial of aducanumab, which was positive. More than 100 patients receiving the drug showed a drop in Alzheimer’s-related beta-amyloid plaque in the brain, as well as continued to show a slowing of cognitive declines. But anyone who follows Alzheimer’s drug trials knows that Phase III is where Alzheimer’s drugs go to die, and there have already been literally hundreds of failures. And the patient population for the Biogen trial is very early-onset Alzheimer’s.

Still, it’s one of many reasons to be positive about Biogen and Alzheimer’s. Flynn noted, “It is difficult to overstate the growing societal burden of Alzheimer’s disease. … By 2050, one new case of Alzheimer’s disease is expected to develop every 33 seconds in the United States.” The analysts note that if aducanumab were approved, it has the potential of hitting $12 billion in sales.

Other reasons to bet on Biogen is that it’s an innovative biotech company that swings for the fences. As a result, it strikes out a lot, but when it hits, it hits big. Most of its revenue comes from its multiple sclerosis (MS) portfolio. In this year’s first quarter, the company reported $2.38 billion in product revenue, and 40 percent of it came from its topo MS drug Tecfidera. It was approved in the U.S. in 2013, but in the U.S., sales have slowed and are probably not going to improve because of steady competition worldwide.

Flynn, however, noted, “MS is a mature market and competition has been increasing. But while generics and other new entrants could capture share, we don’t expect wholesale ‘re-pricing’ of the category.”

Earlier this year its Spinraza (nusinersen) was approved for infants with spinal muscular atrophy (SMA). In the first quarter of sales, it brought in $47 million and appears to be accelerating.

The Equity Conviction List has about 60 to 70 other companies in addition to Biogen, although Goldman Sachs doesn’t release the list publicly. A Goldman Sachs spokeswoman told the Boston Business Journal that the companies on the list “have a particularly compelling investment case and the best alpha generation.”

While aducanumab’s potential of approval is further down the road, Axovant Sciences (AXON), based in Basel Switzerland, one of Vivek Ramaswamy’s companies, is expecting a readout next month for its Alzheimer’s drug initepirdine. Axovant acquired the drug for mild-to-moderate Alzheimer’s disease for $5 million from GlaxoSmithKline (GSK) . In a Phase IIb trial, it showed a favorable safety and tolerability profile, and showed immediate and sustained efficacy over placebo.

The MINSET trial is looking at 1,315 patients on a stable background therapy of Aricept (donepezil) who will receive either intepirdine or a placebo. Granted, the bar for efficacy seems lower for intepirdine than for Biogen’s aducanumab. Aricept is the most effective drug for Alzheimer’s, which isn’t saying much, but if the intepirdine study shows it helps, even a tiny bit, it’s likely to be approved and can piggyback on Aricept’s patient population.

is currently trading for $290.82. Shares traded on August 10 for $281.15.

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