US biotech giant Biogen – in which the Swiss investor BB Biotech (SIX:BION) holds a stake equivalent to 2.9% of its portfolio value – has seen its stock open up 7% this morning on the back of announcement by the FDA of a three-month delay in the review of the controversial Alzheimer’s therapy aducanumab. The stock price rise has come about, counter-intuitively, on the back of a regulatory delay, because of the FDA was previously widely expected to reject the drug and would therefore not need additional time to complete its review.
Although Biogen stated that as part of an ongoing review, it submitted a response to an information request by the FDA that will require additional time for review, it is now conjectured that there must be a better chance the FDA will ultimately approve the drug. The FDA faces a “judgement of Solomon” dilemma where to approve the drug would require it to break its own rules over what constitutes the standard of evidence and overrule the unambiguous advice of an outside expert committee convened to review the data, while to reject it, would likely set back drug development in the Alzheimer’s field back by five years or more.
Investor sentiment towards aducanumab has swung wildly over the past year, but BB Biotech’s managers have taken an interesting non-consensus view that the market is too bearish on the probability of approval, a fact that now may be becoming more apparent. Sell-side analysts are split over the likelihood of approval, but the three-month delay to 7 June – may give them some pause for thought.
As of 30 December, BB Biotech’s holding in Biogen was equivalent to 2.9% of portfolio value (worth approximately CHF115m or $130m). This has now risen, by approaching 20%, from its presumed Q4 entry price. BB Biotech’s own shares were up 2% this afternoon at CHF80.75; NAV/share was CHF76.25 as of last night.
QD comment. BB Biotech’s investment is Biogen is a bold move that highlights its different investment style compared with peers. BB Biotech offers investors exposure to this still difficult-to-call binary event, alongside the diversification inherent with its wider portfolio.