Shares of Biogen (BIIB) rose and tumbled and soared again after the biotech concern presented additional phase 3 data for Alzheimer’s disease drug candidate aducanumab, asserts Jason Clark, value investing expert and contributing editor to The Prudent Speculator.
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While there seems to be a divide among investors about the potential for Biogen’s Alzheimer drug, the company still plans to file for Food and Drug Administration approval of aducanumab in early 2020 based on full data from its two phase 3 studies, Engage and Emerge.
There is little doubt that this medication has blockbuster potential, though some in the Alzheimer arena are calling for a third phase 3 study to further evaluate risks versus potential benefit.
While the most recent update was encouraging, we’re still uncertain about how the FDA will view the weaker Engage trial results in light of the benefit seen in the Emerge study.
Versus the news in March that Biogen was going to discontinue work on aducanumab, the further data release and the upcoming filing are still an overall positive surprise.
If approved, this drug could end up being one of the biggest pharmaceuticals ever, though we realize that there is a long way to go before the FDA allows aducanumab to come to market. No doubt, there will be plenty of stock price volatility as news flows out, as evidenced by Thursday’s trading!
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Independent of the Alzheimer drug potential, we like that Biogen is still generating strong free cash flow which can aid in strengthening a pipeline that we already think has solid long-term potential keying on cancer and neurology disorders.
All are important because BIIB still faces looming pressure from generics in the coming years for its MS drug Tecfidera and potential competition from Novartis for its spinal muscular atrophy treatment Spinraza. Even with the positive updates, our target price remains $460.
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