Biogen could easily take on Roche and Eli Lilly in Alzheimer's treatment, an analyst said Thursday as he updated Biogen stock.
In response, Biogen stock surged 6.4% to 269.94. On today's stock market, Roche and Lilly stocks advanced 0.7% and 2.3%, respectively.
Stifel analyst Paul Matteis expects Biogen's experimental drug, lecanemab, to ultimately generate north of $7 billion in annual sales. That's up from his previous call for $5 billion.
Matteis is bearish on Roche's efforts with a drug called gantenerumab which has a cumbersome dosing schedule. He expects Lilly to eventually win the lion's share of the Alzheimer's market.
But there's still room for Biogen, he said.
"Even the more cautious/conservative physicians expect to prescribe lecanemab a meaningful amount," he said in a note to clients. "And a small percentage share in Alzheimer's can translate into billions in revenue."
Biogen Stock: Cutting Down On Amyloid
Matteis upgraded Biogen stock to a buy rating from hold. He also boosted his price target to 299 from 233.
Lecanemab works by cutting down built-up beta amyloid in the brain. The plaque has ties to Alzheimer's disease, but experts are still split on the benefits of removing it. However, in a final-phase test, Biogen said removing beta amyloid led to a 27% slower decline in cognition after 18 months.
The results sent Biogen stock up almost 40% in a day. But shares have cooled somewhat since. Matteis acknowledged uncertainty facing lecanemab, which must be infused at specific centers. Another issue could be Medicare reimbursement. The Centers for Medicare and Medicaid Services largely declined to cover Biogen's Aduhelm, an Alzheimer's drug that gained accelerated approval last year.
Biogen stock has struggled in the aftermath of the Aduhelm controversy. Chief Executive Michel Vounatsos is now on his way out, and the company has yet to name a new CEO.
But Matteis remains bullish on Biogen's changes with lecanemab. He sees a 90% chance of success.
Rivaling Roche, Lilly Drugs
Matteis doesn't expect Roche to prove an obstacle to Biogen. The company's gantenerumab requires a "cumbersome nine-month" schedule. Over those months, the drug dosage must be increased slowly to prevent the potential for amyloid-related imaging abnormalities, or ARIA. ARIA is swelling in parts of the brain. It's a common side effect of amyloid-targeted treatments.
But the slower administration of gantenerumab likely means it's less effective in treating Alzheimer's, Matteis said. He expects the results of two upcoming Phase 3 studies to be inconsistent.
Meanwhile, Lilly's donanemab appears to be as effective as Biogen's lecanemab. But bullishly for Biogen stock, lecanemab could be the safer drug.
"And its (Lilly's donanemab) more convenient dosing profile is a very real threat," he said. "That said, we expect donanemab's ARIA rate to be two times higher than lecanemab, which supports there being room for both products."
He noted much of the Alzheimer's population carries a genetic mutation or other conditions that increase the risk of ARIA. This could arguably justify the use of lecanemab over donanemab, he says.
Biogen Stock Breaks Out
The Alzheimer's data helped Biogen stock break out of a flat base with a buy point at 222.92, according to MarketSmith.com. Shares are now near a profit-taking zone, 20%-25% above their entry.
Biogen stock also has a strong Relative Strength Rating of 93. This puts shares in the leading 7% of all stocks in terms of 12-month performance, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
