Biogen stock tumbled Friday after European regulators rejected its Eisai-partnered Alzheimer's treatment, saying the side effects are too potent.
Eisai, which is leading the drug's development and regulatory submissions, plans to ask the Committee for Medicinal Products for Human Use to reexamine it decision. But RBC Capital Markets analyst Brian Abrahams noted that this still delays a potential launch.
The drug, Leqembi, is already approved in the U.S., Japan, China, South Korea, Hong Kong and Israel. It works by removing built-up plaque in the brain known as beta amyloid. But doing so can cause brain swelling called amyloid-related imaging abnormalities, or ARIA. ARIA is usually asymptomatic and temporary, but it can be severe or deadly for some patients.
"Practically speaking, Europe is not the largest market for Leqembi given pricing considerations," Abrahams said in a report. "Still, this is likely to somewhat hamper global perceptions and momentum for the drug and the class."
On today's stock market, Biogen stock skidded 7.2% to 211.17. Shares closed below their 50-day moving average, according to MarketSurge. Eisai stock plunged 12.9% to 9.25. Shares of Eli Lilly, which makes a rival Alzheimer's treatment in the same drug class, fell 2% to 804.62.
Biogen Stock: Peak Sales In Jeopardy
Specifically, the European regulators said the risk of ARIA counterbalances the benefits of Leqembi. In the tests that helped win U.S. approval, patients who received Leqembi for 18 months had a 27% slower decline in cognition vs. placebo recipients.
Abrahams had estimated Leqembi sales would hit a peak of $8.3 billion. About 20%, or $1.7 billion of that, stemmed from Europe.
He kept his outperform rating and 303 price target on Biogen stock.
The decision is "somewhat surprising" given physicians have become more comfortable managing ARIA "and the alternative (no disease-modifying treatment) has invariably high morbidity and mortality," he said.
Some Re-Examinations Succeed
Historically, drugmakers have appealed 35 negative opinions issued by CHMP over the past 10 years. Only seven of those initial rejections have been overturned. That means there's a 20% chance European regulators will reverse their decision on Leqembi, RBC's Abrahams said.
In two cases, regulators were more comfortable narrowing the patient population and/or proposing additional monitoring requirements. It's important to note that patients with mutations in a gene called APOE4 and patients taking certain medications have a higher risk of developing ARIA.
"We believe Biogen/Eisai could conceivably propose more stringer ARIA monitoring protocols or restricting use in patients with two APOE4 copies, the population CHMP called out as having most concerns about," Abrahams said.
'The Writing Is On The Wall'
Evercore ISI analyst Umer Raffat said Eisai won't be able to submit new data to make its argument for approval. Eisai will have to make "an emphatic case in the re-examination," he added. But Raffat maintained his outperform rating on Biogen stock in a client report.
Piper Sander analyst Christopher Raymond, on the other hand, doubts European regulators will change their opinion. The re-examination can last up to 60 days.
"But for our part, we think the writing is on the wall, and therefore are taking this component of Leqembi update out of our model," he said in a note. This is "not a big deal from a modeling perspective … but tell that to patients."
Biogen and Eisai estimate there are about 6.9 million people with Alzheimer's disease in Europe. They expect this number to nearly double by 2050 as aging populations increase.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
