Thursday’s full approval of the Alzheimer’s disease drug Leqembi came as expected. Some investors are selling on the news.
Biogen
stock (ticker: BIIB) were off 3% in Friday morning trading, at $276, while over-the-counter trading in the American depositary receipts of Japan’s
Eisai
(ESAIY) were down 1% at $17. The companies are splitting profits from the drug, which became available to Americans after the Food and Drug Administration gave it a provisional “accelerated approval” in January.
This week’s full approval allows the costly drug to be covered by Medicare. That federal program is the health insurer for most of the one million to two million patients eligible for Leqembi. The Centers for Medicare and Medicaid Services said it is ready to cover 80% of Lequmbi’s $26,500 cost for patients with early-stage Alzheimer’s who are enrolled in Medicare’s Part B drug program.
Sales forecasts for Leqembi call for it to become a big, but not huge, seller—with annual revenue of $2 billion to $3 billion by 2026. It requires twice-monthly visits to an infusion clinic, so Wall Street is watching for FDA action on a once-monthly rival drug from
Eli Lilly
(LLY). Biogen and Eisai are expected to seek approval for a more-convenient injectable version of Leqembi next year.
Biogen has said it doesn’t expect to clear a profit on Leqembi until late 2024. Complexities in administering and record-keeping will slow the launch of the infused drug, said Wall Street analysts in Friday notes.
“Rollout of Leqembi is expected to be slow, as there are many bottlenecks in place,” wrote Danielle Brill of Raymond James. The treatment requires infusion every two weeks, and she points out that hospitals have limited capacity in their clinics. Brill has a Neutral rating on Biogen stock.
Medicare’s coverage of Leqembi is the first for a class of drugs that dissolves a sticky plaque whose accumulation in brain cells is a hallmark of Alzheimer’s. The government health program refused to cover Aduhelm, an earlier plaque-buster from Biogen that didn’t demonstrate a clear effect on slowing the memory decline associated with the illness.
Leqembi’s approval was recommended last month by a panel of outside advisors to the FDA, but the experts discussed its significant side effects, including brain swelling in patients with particular genetic profiles. So its prescribing will entail genetic tests and required reporting of brain scans to a Medicare registry.
A key question, said RBC Capital Markets analyst Brian Abrahams in a Thursday note, is how Medicare will reimburse these required tests. Abrahams spoke with the agency, and says he was told that it is still deciding which of these costly tests it will cover. The expense of a PET-scan every six months could be a barrier for many patients. Abrahams has a Buy rating on Biogen stock with a $351 price target.
Biogen shares trade at less than 18 times the consensus forecast for next year’s earnings, which is a real discount to the 20-plus multiple of the
S&P 500 index.
So most analysts surveyed by FactSet recommend the stock.
Important scientific updates on the company’s drug and those of rivals such as Lilly will come out this month, when the Alzheimer’s Association International Conference begins on July 16.
Write to Bill Alpert at [email protected]
Read the full article here