Eoneren
Phase III results from Biogen Inc. (NASDAQ:BIIB) and Eisai Co., Ltd. (OTCPK:ESALY) have shown a clinical benefit of their Alzheimer’s disease ((“AD”)) drug lecanemab. With an approval date scheduled for January 2023, both companies could be in for a cash windfall as, if approved, the drug is expected to quickly reach and surpass blockbuster status.
Main news
Biogen recently announced positive phase III clinical data for its novel treatment for Alzheimer’s disease (AD), lecanemab. Top-line results from the Clarity AD trial showed lecanemab met its primary endpoint and reduced the clinical decline in cognitive and functional scales by 27% compared to placebo at 18 months, with a benefit seen from as early as 6 months. There was also a significant improvement in amyloid levels as measured by PET imaging, an important marker of Alzheimer’s disease progression.
In March 2022, Eisai began submitting application data to Japan’s medicine regulatory agency, with the aim of obtaining an early approval. The additional findings from the Clarity AD trial should lend extra weight to the application.
The FDA has already granted priority review of lecanemab, and agreed that the results of the Clarity AD trial can serve as the confirmatory study to verify the clinical benefit of lecanemab. The positive results are therefore very promising to support the approval of the drug. The PDUFA date is set for January 6, 2023, meaning we will have to wait for a final decision on the drug.
Approval of lecanemab would be the second AD for Biogen’s, following release of the much publicised Aduhelm (aducanumab-avwa) in 2021. Aduhelm was the first treatment designed to specifically target the underlying mechanisms involved in AD. However, the announcement was surrounded by controversy over the decision to grant accelerated approval and questions over key clinical trial results, which led to the resignation of three members of the FDA approvals board. Nevertheless, Aduhelm has enjoyed some success, and Biogen earlier this year announced some positive long-term results, with continued delay of cognitive decline over two years in patients treated with Aduhelm.
Unlike with the results of Aduhelm studies, the Clarity AD trial gave a clear benefit, suggesting there should be much less ambiguity. A BMO analyst suggested that these results should be strong enough to support regulatory approval.
If accepted, lecanemab could bring in huge profits for the companies. The same BMO analyst suggested annual sales could reach $13.3 billion. Another analyst predicted annual sales of $8 billion, with a total addressable market (“TAM”) of over $60 billion. Clearly, this drug is touted to rapidly become blockbuster for both companies.
A team effort
The collaboration between Biogen and Eisai on lecanemab is a continuation of their previous work on Aduhelm. Both companies announced in March that they have amended their previous agreement, with Eisai to receive tiered royalties based on net sales of Aduhelm, starting at 2% and increasing to 8% once annual sales reach $1 billion. Biogen will also get sole decision-making rights for Aduhelm.
Other arrangements remain; Eisai will keep its share of expenses capped at cost until December 2022, after which the tiered royalty model will commence, and Eisai will no longer participate in Aduhelm beyond these royalties.
Regarding lecanemab, both companies are co-commercializing and co-promoting the product, with Eisai having final decision-making authority. Importantly, there will be a 50% split between companies regarding any profits or losses coming from lecanemab. Biogen will be responsible for manufacturing the drug from its facility in Stockholm for 10 years.
Strong market reaction but risks remain
Both Biogen and Eisai are up over 35% each at time of writing, suggesting there is a lot of excitement about the news. Prices may ebb over time, no doubt, but it is a positive sign of market sentiment. However, we are still a few months until the final announcement and the results are no guarantee of approval. The main associated risk related to this story is failure to get approval from regulators. This would be a major setback, and one that is difficult to rectify without further costly studies.
There is also the consideration of competition. While Biogen and Eisai are leading the way in novel treatments for AD, they are not the only players in this field. Roche (OTCQX:RHHBF, OTCQX:RHHBY) has started trials of its AD drug, gantenerumab, while Eli Lilli’s (LLY) donanemab has shown positive results in clinical trials. Both products are in the process of regulatory submission, and could become competitors to lecanemab in the future.
Conclusion
Both Biogen and Eisai are up significantly on the news of the results. Prices may fall slightly as sentiment settles, and future earnings for lecanemab depend on approval next year. However, a positive decision from regulators would put both companies in place for significant global sales and solidify their position as leaders in AD treatment. Initial price increases in the short term are likely to be volatile, due to the huge excitement about the results, but a positive decision would be likely to bring with it a positive price movement.
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