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Biogen's surprising Alzheimer's news boosts investors' confidence in pipeline

Biogen Inc. is doubling down on its experimental Alzheimer's disease drug aducanumab with plans to pursue U.S. approval, a surprise reversal that investors rewarded with a surge in the company's stock price and renewed optimism in the company's product pipeline.

Investors and patients had little hope for the drug, an amyloid-plaque cutting agent Biogen is developing with Japan's Eisai Co. Ltd., after it failed a futility test in March.

Biogen's stock price fell by more than 29% at the time, while the company's mainstay medicine for multiple sclerosis faced sales erosion within the next decade. But Biogen CEO Michel Vounatsos said at the time that the company was "not on a burning platform."

On Oct. 22, Biogen said it had found in the results of the supposedly failed studies new reason to believe the drug could work. Vounatsos said on the company's third-quarter earnings call that the cause of the decline the failed studies was miscalculated to begin with.

"In retrospect, the result of our analysis was incorrect," Vounatsos said. "Based on what we know now, it is clear that the pre-specified futility criteria did not adequately anticipate the effect of all the variables in these trials."

The stock soared 26.2% as of 12:13 p.m. ET after rising as much as 43% before U.S. markets opened.

The news on aducanumab dominated the company's earnings call, with analysts parsing what it might mean not only for the company but for the future of Alzheimer's research and drug development.

"One cannot stress enough how surprising this news is today," Stifel analyst Melissa Scott said in an Oct. 22 note. "Not surprised to see Biogen up this much, and this is undoubtedly a positive for the entire space that arguably the biggest category in biotech, Alzheimer's, may not be totally dead."

But SVB Leerink analyst Geoffrey Porges asked whether the move was "the dawn of a new era or a relapse in amyloid addiction."

The decision to seek approval for aducanumab comes shortly after Biogen's executive vice president of R&D Mike Ehlers left the company on his own volition, executives said.

A burgeoning pipeline

Alfred Sandrock, the new executive vice president of R&D who is also the company's chief medical officer, pointed to the rest of Biogen's pipeline as worthy of investors' enthusiasm.

"Given our depth of expertise, our deep and interconnected neuroscience pipeline, including nine additional readouts expected by the end of next year, we believe that Biogen is uniquely positioned to capture the opportunity in neuroscience and potentially deliver a suite of breakthrough therapies for diseases of the nervous system," Sandrock said.

Among those is the company's followup to Tecfidera, a multiple sclerosis drug that is facing challenges to its exclusivity from competitors. The new treatment, called Vumerity, showed positive results in a late-stage study, has received tentative approval from the U.S. Food and Drug Administration, and is up soon for final approval, Sandrock said.

Biogen is also exploring new and expanded uses for its Crohn's disease and multiple sclerosis drug Tysabri, worldwide revenues for which rose 3% year over year in the third quarter.

The company's spinal muscular atrophy drug Spinraza facing competition from the expensive gene therapy Zolgensma from Novartis AG — brought in revenue of $547 million driven by patient volume. SVB Leerink analyst Mani Foroohar said more than half of all Zolgensma patients have switched from Spinraza, but that the impact to Biogen appears to be limited.

And Biogen has just launched a 125-patient trial of high-dose Spinraza, which could boost the efficacy of the drug. Evercore analyst Umer Raffat called the trial "very intriguing."

Following the trend of growing biosimilar sales worldwide, Biogen's biologic copycat business grew 36% to $184 million in the quarter.

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