BB Biotech’s large bet on the US regulatory approval of Biogen’s Alzheimer’s disease therapy aducanumab has met with success, after the FDA rendered an approval in a landmark, although highly controversial, decision yesterday. The news prompted a huge rise in Biogen’s share price (Nasdaq: BIIB), which closed 38% up at $395/share, having peaked at $450 earlier in the day.
The drug – to be branded Aduhelm – is predicted to become one of the most lucrative biotech products in history, with peak sales pencilled in of around $10bn/year. This figure is itself likely to be revised upwards, as Biogen has priced the drug in the US more aggressively than analysts have modelled, at $56,000 per patient/year. Aduhelm is the first drug ever approved to address an underlying mechanism believed to cause Alzheimer’s and potentially slow the cognitive decline, if albeit marginally. However, the clinical trial data substantiating this claim are highly controversial and will require further confirmation.
The Swiss investment company took a large position in Biogen stock towards the end of Q4 – probably at around $250/share – in the belief that the US regulator would approve the drug. At the time, this ran counter to the consensus view, as the FDA’s scientific advisory committee had rendered an unambiguously negative view of the adequacy of these data for approval. This set up the US regulator’s decision this year to be the largest biotech binary event in 2021, and indeed it generated a near $20bn movement in market capitalisation.
BB Biotech’s stake was originally worth $130m and represented 3.3% of its 31 March portfolio value. The approval prompted share price increases across the board for other biotechs involved in developing Alzheimer’s treatments, although BB Biotech has low exposure here.
Biogen is exposed to other (smaller) binary events, including the outcome of a trial of Sage Therapeutics’ Phase 3 trial of zuranolone in major depression, which is also imminent (Biogen is Sage’s commercial partner). BB Biotech also has a stake in Sage, equivalent to 2.9% of portfolio value as of 31 March.
BB Biotech stock opened up marginally this morning at CHF82.9/share; its NAV at close yesterday was CHF68.4/share.
[QuotedData comment: The success of the investment in this binary event highlights two of BB Biotech’s core strengths: its ability to research unusual and/or high-risk situations on a deep fundamental level and the ability to exploit its high conviction ideas. Such trades would often be too risky for individual investors or even institutional funds that are concerned about potential under-performance against benchmarks had the trade not been successful.]
BION : BB Biotech’s Biogen bet plays out successfully