Despite a Lilly flop, Wall Street wags remain bullish on a Biogen Alzheimer’s drug

Now that a widely anticipated Alzheimer’s medicine from Eli Lilly has failed a key test, a lot of attention is turning toward Biogen, which is developing its own compound to combat the notoriously hard-to-treat disease. A key question now, of course, is whether the Biogen drug will also be a flop or if there are enough distinctions to warrant even a little optimism.

At first blush, one key similarity suggests Biogen may face a similar fate. Like the Lilly medicine, its drug, called aducanumab, was tested for clearing plaques called beta-amyloids, which build up in the brains of patients with Alzheimer’s. Many scientists believe the plaques are central to the effect that the disease has on neurons. And other drugs testing this hypothesis have failed.

Investors, not surprisingly, are worried. Biogen stock fell more than 7 percent in pre-market trading Wednesday after Lilly announced its drug had failed and finished the day down nearly 4 percent. But most stock watchers are betting the Biogen treatment may have a better shot. Even though both drugs rely on the hypothesis that reducing amyloid beta plaques can be successful, they note the Biogen medicine works differently. Here is what some of the wags are saying:

Biogen’s drug is different, RBC Capital Markets analyst Michael Yee wrote to investors. The drug demonstrated “clear” statistical significance in reducing beta-amyloid plaques while others have not and it has shown statistically significant benefits in cognition in earlier, small studies. Moreover, it is a different antibody, which is “important.” And so, he thinks Biogen will move its drug into a late-stage study.

Another analyst, Geoffrey Porges of Leerink, readily acknowledged the Lilly failure is a “serious blow” for Biogen and other companies researching Alzheimer treatments, given the hurdles to developing a successful drug. At the same time, he also noted that Biogen’s drug is a “materially different antibody [that was tested] in a different trial, at a different dose, and in different patients” than the Lilly drug.

He went on to note that Biogen’s early-stage trial showed “more robust effects than any trial with [the Lilly drug], has a different patient population with a milder disease, more rigorous confirmation of amyloid and uses a much higher dose of antibody and different endpoints.” In other words, these are reasons for optimism.

In his own investor note, Evercore ISI analyst John Scotti pointed out that Lilly drug reduced plaque “minimally” in an analysis of patients, after adjusting for the region of the brain that was measured. He cited a conversation in which Biogen execs explained that they did a follow-up analysis on how the use of different regions of the brain can have on measuring plaque reduction.

“The critical question now is whether the amyloid hypothesis is dead, wrote Joshua Schimmer of PiperJaffray in an investor note. “We don’t think so, because our view to date has been the [Biogen] study is the most potent approach for amyloid lowering and we were skeptical whether the effect [of the Lilly drug] was adequate.”

And Sanford Bernstein analyst Ronny Gal was upbeat. “This seems to be the best result for Biogen,” he wrote. “It suggests that the amyloid beta hypothesis seems correct and yet this eliminates an early competitor.”

But not everyone is bullish. Baird analyst Brian Skorney offered a more sobering view.

“Bulls will argue that that [the Biogen drug] has the ability to clear amyloid plaques and [the Lilly drug] doesn’t and therefore the study failed because the drug failed to achieve its intended mechanism,” he wrote in his own investor note.

“This is a fair point. But in the face of repeated failure to demonstrate a clinical effect for multiple beta-amyloid targeting antibodies and the widely held view in academia that testing an early-stage patient population would yield the most robust effect, as [the Lilly trial] was designed to do, today’s failure comes pretty close to a nail in the coffin for the amyloid hypothesis.”

He added that data will be closely scrutinized at an upcoming Alzheimer’s conference next month, where the Lilly data will be presented, including biomarkers that can be directly compared to results that Biogen will present from its own Phase 1 trial. “Look for parallels in both drugs’ ability to reduce amyloid plaques,” he wrote. “The primary selling point for [the Biogen drug] has been the dose-dependent reduction in plaques. The company’s best hope is that solanezumab failed to show an impact” on plaques.

This post was updated to include a comment from Baird analyst Brian Skorney.