Biogen Inc shares witnessed a massive sell-off on Wednesday after Eli Lilly, a major competitor in medicine manufacturing, had failed in a key trial of its Alzheimer’s drug. The stock cascaded to 305.93 in the previous session, down by 3.83% or $12.18. The loss did not end there—on Thursday’s premarket trading, the BIIB stock extended a decline of 7.61% or $24.2 to trade at 293.75.
On the chart given, Biogen has been strongly bullish since jumping in late July and moving higher in August . The stock has consequently fallen into a three-month low in October, but reached August-level highs nonetheless shortly . However, the unexpected fall could be seen  in volatile trading.
Due to Biogen manufacturing a flagship drug similar to Eli Lilly’s solanezumab, fear spurred among investor that the biotech stalwart’s aducanumab could face the same problems after Eli Lilly failed a key drug trial.
Solanezumab did not meet the main endpoint in the EXPEDITION3 clinical trial. Biogen is developing a similar treatment with Eisai as a possible Alzheimer’s disease modifying treatment — the same thing that Eli Lilly was tracking.
Biogen is targeting beta amyloid— the protein alleged to trigger toxic brain plaques that lead to Alzheimer's. Eli Lilly's recent Expedition trial examined the effect of its drug darling on patients with dementia due to Alzheimer's.
However, solanezumab failed to show a statistically substantial improvement in cognition decline compared with patients on the placebo, Eli Lilly stated in a press release. Secondary endpoints “directionally favored solanezumab, (but) the magnitudes of treatment differences were small.”
Eli Lilly expressed plans to continue pursuing Alzheimer's research, but did not mention what that would mean for the failed drug. The complete results will be presented on December 8.
Previously in September, Biogen broadcasted that aducanumab was granted “Fast Track” designation by the Food and Drug Administration. The company also noted the following results that in a completed interim analysis from PRIME, efficacy and safety data were consistent with results previously reported. These data support the design of the ongoing Phase 3 ENGAGE and EMERGE studies.
Biogen plans to share detailed information about these results and the drug’s effectiveness at upcoming medical meetings, particularly at the Clinical Trials on Alzheimer’s Disease conference in San Diego on December 9, 2016.
Despite the BIIB stock falling, it had cut losses by more than half from premarket trading as investors assessed the damage to the chances of the company's drug on Wednesday.
Nonetheless, in contrast to Eli Lilly’s treatment, many investors have resumed their belief that Biogen’s drug is different—better, than solanezumab. Data showed it could be more effective in targeting beta amyloid, claimed Raymond James analyst Chris Raymond.
While “the risk has gone up with respect to aducanumab,” Raymond said, part of the reason the stock recovered the bulk of its initial losses on Wednesday was that investors did not entirely ignore the odds aducanumab could still succeed.
Another possible factor that lent support to Biogen, which has a top franchise of multiple sclerosis drugs, is that the company, with a market value of about $66 billion, has been the subject of takeover rumor.
Biogen boasts already of multiple approved therapies and biosimilars, having a healthy pipeline of 17 different drugs. This gives the biotech company a wider degree of diversification in its portfolio, which diminishes a product-specific risk rising from a specific drug failure.
Today, the decline worsened after limiting its losses yesterday. But with investors slowly returning their confidence for the stock and the future of aducanumab and its reputation, we can see a recovery for Biogen soon. As aforementioned, Biogen was strongly bullish before the sudden plunge.
The selloff in Biogen stock is concerning, considering that bullish tailwinds were starting to pick up as the bearish headwinds were beginning to wind down. Should BIIB stock fill the price gap, it would be quite easy for the bullish momentum to return.
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