Moment of truth for Biogen's big Alzheimer's bet

The most anticipated event for Biogen Idec's drug pipeline, Friday's release of data on its experimental Alzheimer's medicine, started 12 years ago with the rekindling of an old friendship.

It had been more than a decade since Dr. Al Sandrock, a neurologist in drug development at Biogen, had seen his friend Dr. Roger Nitsch. The two had met while both worked at Massachusetts General Hospital in Boston. But when Sandrock came across a paper in the journal Neuron describing an exciting early development in the treatment of Alzheimer's disease, he got back in touch.

That was 2003. Nitsch was an author on the paper and a researcher in psychiatry at the University of Zurich; he ultimately founded a company called Neurimmune and forged a partnership with Biogen to help develop what became known as BIIB037. Now, Biogen is set to report the first full data in human trials from research on BIIB037 at an Alzheimer's and Parkinson's disease conference in Nice, France.

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Geoff Porges, an analyst with Sanford C. Bernstein, said the program "has become vitally important to Biogen, and also one of the most important clinical catalysts for the entire biotechnology group this year."

Cowen's Eric Schmidt estimates very positive data could drive the stock up $50 to $60, from about $428, or down the same amount if they're a bust ("somewhat disappointing" results that don't meet high expectations could drive the stock down $20 to $30, he said).

Why all the excitement? First, the sheer size of the Alzheimer's problem: More than 5 million Americans are estimated to have the disease, a number that could triple by 2050, according to the Alzheimer's Association. It's the sixth-leading cause of death in the U.S.

Worse, there are no drugs on the market that slow the underlying cause of the disease; the only approved therapies aim to work on the symptoms. And there have been many high-profile and expensive failures of medicines in the late stages of development, making it a risky bet for any company. A successful drug could draw $10 billion in peak annual revenue, analysts say.

That's why, when Biogen shared initial positive results from an early study in December, the stock jumped 6 percent—and has continued climbing, up 39 percent since Dec. 1, compared with a 19 percent gain for the Nasdaq biotechnology index.

The study was in the earliest phases, designed primarily to assess safety. So investors were shocked when it also showed signs of efficacy: clearing the amyloid plaques associated with the disease, and slowing the cognitive declines that are hallmarks of Alzheimer's. Biogen said then that it planned to move the drug "aggressively" into phase 3 trials, the last stage generally required before applying for regulatory approval.

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"It was one of the most exciting days I can remember in my lifetime," Sandrock, now Biogen's chief medical officer, said in a telephone interview, of seeing the data that revealed a statistically significant benefit on two measures of cognition.

Friday's presentation will provide more information on the strength of those improvements, and analysts hope to see proof the drug really appears to work, that the positive signs weren't just a fluke of a small study.

Safety is also key. Biogen reported a side effect known as ARIA (amyloid-related imaging abnormalities) in the study, often seen in drugs that clear the plaque from the brain. It's thought that when amyloid plaques are removed, it can result in weakness in the brain's blood vessels, causing them to leak. Analysts say a positive result Friday would show that Biogen can administer the drug at higher doses—up to 10 milligrams per kilogram, according to Bernstein's Porges—without prohibitive levels of ARIA.

In gauging what determines success, analysts turn to what other Alzheimer's drugs have shown in clinical trials. Porges said a reduction in cognitive decline of 20 to 30 percent compared to placebo should be considered positive, while RBC Capital Markets' Michael Yee said a 34 percent improvement in the slope of decline would imply the drug is at least as good as Eli Lilly's solanezumab.

Lilly's program was one of two to see high-profile disappointments in 2012; the other was Johnson & Johnson and Pfizer's bapineuzumab. Lilly continued its program after seeing a potential benefit in patients with earlier forms of Alzheimer's, while bapineuzumab was terminated from development.

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Biogen has taken a similar approach as Lilly, targeting only patients in very early stages of the disease. It also screened clinical trial participants to admit only those who actually had amyloid plaque buildups in the brain, the target of the drug.

"When we asked Biogen whether the successful trial result was attributable to a better drug, or to a better endpoint, or to better patient selection, the company suggested that their initial success might be a combination of all three factors," Porges wrote in a March 16 research note.

Twelve years ago, after Sandrock spotted Nitsch's name on the paper that caught his attention, he invited his old friend to speak at Biogen about the work. What excited him was seeing human antibodies that bound to the beta amyloid plaques associated with Alzheimer's. Nitsch and his team had identified naturally occurring antibodies in people who were very healthy and cognitively intact into their 90s, or who had Alzheimer's but whose disease was taking a slow course, Sandrock said.

"The hypothesis is that maybe these people have antibodies to bad proteins or protein aggregates and that's why they're doing so well," Sandrock said. "I don't have all the data to know whether that's true, but it didn't really matter to me because they were getting antibodies that were very specific to the protein we're interested in."

Biogen formed the partnership with Neurimmune in November 2007, agreeing to pay up to $380 million and a royalty on sales of any products that resulted. Chris Raymond, an analyst with Robert W. Baird, said annual sales of $10 billion are within the realm of possibility for BIIB037.

On seeing the data last year, Sandrock said the findings shed light on a key question about Alzheimer's: whether the amyloid plaques associated with the disease are actually causative. Known as the amyloid hypothesis, it's been questioned as drug after drug targeting the plaques have failed in development.

"There was still a lot of people who didn't believe it," Sandrock said. "And the other thing was a lot of people didn't believe that reducing plaque or making amyloid plaques go away would be of any use." Seeing the effect on cognition made the amyloid hypothesis much more plausible. "Now even many of the naysayers had to pay attention to it," he said.

Expectations are high running into the presentation, with Leerink's Joseph Schwartz noting Biogen executives' "bullish commentary" into the meeting.

Dean Hartley, director of science initiatives at the Alzheimer's Association, said there's reason to be optimistic.

"Anytime there's a hint in movement for cognition ... means there might be a robust effect," he said by telephone. "That's why it may be exciting."