Why Biogen, Lilly, and Prothena Stocks Soared This Week

What happened

The U.S. Food and Drug Administration (FDA) granted accelerated approval to Biogen‘s (NASDAQ: BIIB) Alzheimer’s disease drug Aduhelm (aducanumab) on Monday. This news caused shares of the biotech to soar 44.9% this week as of the market close on Thursday.

Biogen wasn’t the only beneficiary, though. The stocks of other companies developing experimental Alzheimer’s disease therapies also jumped on news of the FDA approval of Aduhelm.

Shares of Eli Lilly (NYSE: LLY), which is evaluating two candidates in late-stage clinical studies targeting the neurodegenerative disorder, rose 15.6%. Shares of Prothena (NASDAQ: PRTA) skyrocketed 55.4% after Oppenheimer increased its price target for the biotech stock to $54 on increased optimism about the prospects for the company’s two preclinical Alzheimer’s disease programs.

Image source: Getty Images.

So what

It’s easy to understand why Biogen’s shares took off so much. The company should have a surefire blockbuster on the way with Aduhelm. The drug is the first therapy approved by the FDA for treating Alzheimer’s disease in nearly two decades.

Biogen announced that Aduhelm will have a list price that translates to $56,000 per year. Around 6 million Americans are diagnosed with Alzheimer’s disease. If the drug is prescribed for just 100,000 of those patients, Biogen stands to rake in close to $5.6 billion annually in sales at the list price.

The positive FDA decision on Aduhelm could also bode well for Lilly’s prospects for donanemab. Lilly reported results from a phase 2 study of the drug in March that showed that it appeared to slow cognitive decline in Alzheimer’s disease patients.

Lilly’s other late-stage Alzheimer’s drug, solanezumab, wasn’t successful in an earlier late-stage clinical study. However, the company hopes for better results in another ongoing phase 3 study of the experimental therapy with asymptomatic patients with Alzheimer’s disease.

Why the excitement about Prothena, which is well behind both Biogen and Lilly? Oppenheimer thinks that the biotech’s PRX012 could be more effective than Aduhelm in treating Alzheimer’s disease. It also believes that the FDA’s approval of Aduhelm established a precedent that should make it easier for other antibodies that target beta-amyloid (as Aduhelm does) to make it to market in the future.

Now what

The FDA’s approval for Aduhelm was highly controversial. The agency’s own advisory committee overwhelmingly recommended against approval of the drug. It remains to be seen how this controversy could impact physicians’ prescribing choices and payer reimbursement.

Investors will want to watch to see if Lilly opts to seek accelerated approval for donanemab in light of the approval for Aduhelm. The big drugmaker previously stated that it wouldn’t do so. As for Prothena, the company hopes to file in the first quarter of 2022 for FDA approval to advance PRX012 into early-stage clinical testing.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

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