Lecanemab And Biogen’s Path To Growth (NASDAQ:BIIB)

Summary

Trying the same thing again and again and expecting a different result may not be the best approach to problem solving. But that is how developers have approached conquering Alzheimer’s disease. Pharmaceutical companies have run exceedingly expensive clinical trials to test the hypothesis that removing amyloid plaques will stop the cognitive decline in Alzheimer’s patients. They have done this again and again and again tweaking the antibodies used to remove amyloid or the patients they enroll in the clinical trials hoping for a better result. Soon, investors in Biogen (NASDAQ:BIIB) and Eisai (OTCPK:ESALF) will get a chance to see if the results are different this time.

Alzheimer’s Disease (AD), the Amyloid Hypothesis and Risk in Drug Development

Alzheimer’s remains the crown jewel of the pharmaceutical business and has been for decades. Alzheimer’s is a terrible disease where families watch their loved ones disappear within their own bodies. It is heartbreaking and it consumes an incredible amount of resources to care for these patients whose demise is unmercifully stretched over many years. Alzheimer’s disease is a market where a disease modifying treatment that meaningfully slows or stops the decline could bring in peak US sales well in excess of $10Bn.

Antibodies, such as Aduhelm, do what they are intended to do— they remove the extracellular amyloid plaques. Unfortunately, the data to date suggests this does not do much, if anything, to stop cognitive decline. Pooled results from 14 trials led the authors to write in The British Medical Journal that, “Pooled evidence from available trials reporting both reduction in amyloid levels and change in cognition suggests that amyloid reduction strategies do not substantially improve cognition.” The most generous layman’s assessment of decades and decades of testing of this approach is that IF removing amyloid works at all, it only works a little.

The amyloid hypothesis was widely embraced for decades. But it is a hypothesis, “an educated guess.” Scientists do not know the cause of Alzheimer’s disease nor the underlying biology that begins or governs the progression. Scientists do not know definitively what the ideal drug should target or when it should be given. Given the poorly understood biology, scientists are shooting a dart at a target in the dark of night.

In many cases, scientists try to cure a disease in mice first. We do not have a mouse or other animal model of Alzheimer’s that sufficiently replicates the disease to work with. Drug development in diseases with poorly understood biology, no validated target or without animal models is inherently riskier. Alzheimer’s disease is the poster child for risk. This is a crucial understanding investors should have.

Upcoming Readouts

There are major readouts of some amyloid removing antibodies coming soon. Whether these antibodies will meaningfully slow cognitive decline is the critical question. First up is Biogen and Eisai who will present topline data on lecanemab from the CLARITY-AS trial in late September. In early 2023, data on Roche’s gantenerumab and Eli Lilly’s (LLY) donanemab will follow.

These drugs broadly have the same mechanism of action as Aduhelm. Aduhelm, was a full out disaster for Biogen. Understanding what happened is critical in interpreting results for lecanemab. Below is a very abbreviated history of the Aduhelm story, which was the first anti-amyloid antibody approved to treat Alzheimer’s disease.

Here is what happened.

1. Aduhelm did reduce amyloid plaques. One pivotal trial (out of two) showed Aduhelm demonstrated a slight slowing of cognitive decline and the other showed no benefit.
2. The FDA reviewed this data and an outside panel of experts was convened. Not a single one voted for approval—10 voted against and one voted “uncertain” as to whether it should be approved.
3. The FDA approved Aduhelm using an accelerated pathway on the basis that the drug did remove plaques and that was “reasonably likely to predict a clinical benefit.” Experts resigned in protest.
4. Biogen stock surged and analysts got very excited and put price targets on the stock in the stratosphere.
5. Many top institutions including Mass General/ Brigham, UCLA, UCSF, Vanderbilt Medical Center, Mt. Sinai, Cleveland Clinic and Johns Hopkins said they would not administer the drug. The unproven efficacy and concerning safety profile led most Doctors in private practice and community settings to follow along.
6. Medicare and Medicaid decided they wouldn’t pay for Aduhelm unless it was in the setting of a clinical trial. Sales were $2.8 m one quarter and the sales team was slashed.
7. Patients may have died due to the known side effect, cerebral edema.
8. Biogen accepted defeat and stopped confirmatory clinical trials. The head of R &D left, the CEO is leaving and the company slashed jobs and wrote off years of investment.

The key takeaway is that when a medicine has poor data to support the risk benefit analysis, the FDA may approve the drug but physicians and insurers are the ultimate decision makers about its commercial success. The key metric investors should be focused on is commercial success and whether lecanemab’s product profile is going to be well received by physicians.

Lecanemab

Phase 2b data showed that 80% of the lecanemab treated patients were amyloid negative after 18 months of treatment. In terms of improving cognition, the highest dose showed a drug placebo difference of 33 percent on The Clinical Dementia Rating Sum of Boxes, CDR-SB, which is the measure used in phase 3 for the primary outcome. The 2b study did NOT meet its primary endpoint.

The CLARITY phase 3 study which will readout out in late September enrolled 1795 patients and is well powered to show a change in cognition on CDR-SB. The endpoint measures both cognitive and functional outcomes. The scale ranges from 0-18 with 18 representing severe dementia. The goal is to observe a slowing of decline in the treatment group when compared to placebo. To meet the endpoint, patients have to perform .37 points better than placebo patients on the CRD-SB score.

In the most recent earnings call, clarity was provided on the bar for approval. “The FDA had stated that they would accept a statistically significant change on an inherently meaningful instrument such as the CDR Sum of Boxes as evidence of a clinically meaningful effect.” Given this is the bar required, it is possible the study will meet the endpoint and the high dose did meet this bar in an early study.

Lecanemab showed a 9.9% incidence of amyloid-related imaging abnormalities-edema/effusion (ARIA) at 10 mg/kg biweekly. This is a much better figure than Aduhelm’s which was 41% in the prescribing information. There were multiple deaths thought to be connected to ARIA due to Aduhelm. The poor safety profile was likely as large a factor in physician’s hesitancy to prescribe as the questions surrounding efficacy.

The critical question is how will physicians respond to data if lecanemab ekes out a win and hits the endpoint? Is .37 points meaningful on an 18 point scale and will it justify the albeit lower risk of ARIA and the considerable cost of administering the antibody at an infusion center?

What constitutes a clinically meaningful impact is worth pondering for Lilly investors as well. Donanemab did hit the primary endpoint in its phase 2 study and appears to be exceptionally good at removing amyloid. Lilly used a unique endpoint that incorporates cognition and functional outcomes which is scored from 0 to 144 with lower scores representing greater impairment. The treatment effect in phase 2 was a difference of 3.2 points on a scale of 144. While this was statistically significant, the better question is will physicians consider this clinically meaningful.

Analyst Commentary

Analyst Paul Matteis of Stifel spoke to Barron’s and has a hold rating on Biogen and suggested the stock could fall on news of a failure of the lecanemab clinical trial. Barron’s reported that Matteis wrote, “Biologically speaking, we don’t think lecanemab is all that different than [Aduhelm], and we believe both drugs have clinical activity,” he wrote. “That said, the magnitude of efficacy imparted by both drugs, even if you believe in the mechanism, is modest, meaning that an individual trial is probably no better than a coin flip.”

Conclusions

If data shows clear benefit, Biogen stock should dramatically surge and investors will be well rewarded. Investors should be focused not just on whether the primary endpoint is met, but rather consider how physicians will view the lecanemab data in the context of the impact on the patients they treat. Ultimately, commercial success, not regulatory success, is what produces profits. There is more than one way to fail is what the Aduhelm debacle showed investors.

Biogen’s Q2 revenue and earnings declined year over year and the core portfolio is aging. Biogen also has zuranolone and an Eylea biosimilar which appear promising but lecanemab is also slated to drive a significant part of the growth starting in 2023. While lecanemab may be incrementally better than Aduhelm and may be approved, I assign a low probability that it will be a blockbuster.

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