Ed. Note: This article was originally posted on June 15, 2021. It is being re-run here because we’re getting questions as this is touted as a “brand new buy alert” in recent ads, the ads themselves have not changed and this particular article has not been updated since publication. FYI: The stock teased, DNLI, is currently about 30% below where it traded on that day.
Alzheimer’s Disease is on everyone’s mind these days, thanks to Biogen’s (BIIB) controversial FDA approval for marketing Aduhelm as the first Alzheimer’s treatment in years, and arguably the first disease-modifying treatment at all… so both hope (for patients and families) and greed (for investors) are back in the picture.
The dispute over the approval was heated, with the risks of the drug and the limited efficacy in clinical trials causing several members of the FDA advisory panel to quit after their recommendations weren’t followed by the FDA (and critics went beyond that, saying this approval represents a dangerous loosening of standards from the agency).
Nobody really knows what this will look like when it comes to insurance coverage and usage by doctors, and it might take years of real-world use before we really know whether Aduhelm makes a difference… but it has at least rekindled hope that there will someday be a real solution for the Gray Plague. And since this is arguably the largest unmet pharmaceutical need in the world, Biogen steps into a possible whirlwind of money — even with the limited efficacy, the caution from doctors, and the lack of clarity about how many people will get insurance coverage for the $50,000+ cost of the medicine, Biogen’s market capitalization increased by $20 billion on the day the approval was announced.
It’s also fair to say that this is really just bookending the $20 billion Biogen lost in value on the day they abandoned Aduhelm, then called aducanumab, when their early 2019 clinical trial results led them to believe it would not be effective, and Biogen’s value is just back to where it was in that prior hopeful period in 2017 and 2018… but still: Hope is in the air, and Alzheimer’s Disease makes investors see dollar signs.
And, frankly, there’s also a reset to some degree in the minds of investors now — while a couple decades of billions of dollars of wasted R&D on failed Alzheimer’s Disease drugs had brought us all to a point of cynicism, with the long-held truism that Phase 3 clinical trials are where Alzheimer’s drugs go to die, it might be that we’re resetting that a little bit… even if only to say, “if they’ll approve that drug, with all its weaknesses and question marks, maybe this other drug that I was skeptical about will make it through the gauntlet as well.”
So be ready for the next wave of hope from the pitchmen, who would like to identify the next Aduhelm and the next Biogen. Today we’ll take a quick look at one of those, it’s a spiel from Dylan Jovine, who’s selling subscriptions to his Behind The Markets newsletter ($79/yr), and it throws both Jeff Bezos and Alzheimer’s into the headline to try to get our attention — here’s how the ad starts:
“Jeff Bezos’ Next Big Thing…
“The End of Alzheimer’s
“The tech visionary who built a $1.6 trillion company from scratch has backed an unknown biotech with a new way to treat Alzheimer’s.
“Our research shows that investors who get in today could turn every $1,000 into $1.1 million.”
That’s about a 110,000% return, by the way, in case you’re penciling that in for your retirement plans. That’s almost as much as you would have earned if you bought Amazon on IPO day 24 years ago, in case you’re into that kind of financial pornography (and yes, you would have had to be committed and strong of stomach to hold AMZN that whole time, particularly during its several 50-90% declines along the way… and as it perhaps became 50% or more of your portfolio in recent years).
And yes, the example that Jovine uses for that return potential is our old friend Biogen, which did indeed have a 113,548% return if you bought in the doldrums of the mid-1990s and sold at the peak in 2015 — that was mostly thanks to their blockbuster Multiple Sclerosis drugs, but yes, big drugs create blockbuster stocks sometimes. That’s an outlier, to be sure, but even a more tepid return like that from Amgen (AMGN), often considered the first big biotech success, would be impressive — AMGN is up only about 350% over the past 20 years, similar to the S&P 500’s return, but if you go back further it has now returned close to 100,000% for very early investors, too, but in that case you had to wait about 40 years, not just 20 (both Amgen and Biogen had a few 40-50%+ drops along the way, too, not unlike Amazon, lest you think their success was preordained or easy).
So where is it that Jovine sees these riches? It begins with an origin story…
“In October 2013, a scientist wrote three words down on a piece of paper….
“He then began telling fellow scientists the words. And his ideas for them.
“He soon recruited a team that’s been called “the best scientists on earth.”
“In May 2015, Fidelity Biosciences cut him a check for $217 million.
“In August 2016, he told Jeff Bezos three words. He walked out with a check for $130 million.
“It took just over a year – 390 days – for this company to hit a $1 billion valuation. That’s faster than any company in history, including Facebook.”
And the list of backers grows longer…
“… experts say this treatment could help with “the biggest medical expense facing this country.”
Are you getting our free Daily Update
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just click here...“That’s why large drug companies world-wide have already invested billions into this small firm –
“U.S. Big Pharma giant Biogen invested $1 billion.
“French Big Pharma giant Sanofi invested $125 million.
“And Japanese Big Pharma giant Takeda Pharmaceutics invested $150 million.
“That’s on top of the $330 million Jeff Bezos and Fidelity Biosciences already invested into this.”
Jovine describes this company as having breakthrough science, a massive market, and a strong distribution partner, all thanks to their breakthrough in solving the “blood-brain barrier,” which is our body’s natural defense system that keeps large molecule drugs from getting to the cells in the brain where Alzheimer’s (or other neurological diseases) is operating.
So this is starting to sound a little familiar, perhaps — but here are some more clues about the company from the ad, just to make sure we get our match:
“Instead of inventing one treatment to treat one disease, they’ve invented a platform that could treat multiple diseases…
“5.8 million people have Alzheimers…
“10 million people are living with Parkinson’s…
“And 16,000 people have ALS
“By treating all these different neurodegenerative diseases, you could help over 15.8 million people in the United States alone!
“All told, it’s expected to be a $62.7 billion market.”
So what’s the company Jovine is teasing with his “Past the Blood-Brain-Barrier: The Small Company Revolutionizing Alzheimer’s Disease?”
Well, it’s a familiar one — this is the same company he teased as a “takeover target” a year and a half ago — to his credit, I should be clear, because that pick was very successful (the stock has roughly tripled since then). Jovine is again teasing Denali Therapeutics (DNLI)… in a somewhat typical newsletter marketing strategy, he has taken the big pitch idea from his higher-priced newsletter from last year and recycled that same theme to sell his entry-level newsletter.
Here’s what I said about that at the time:
“Denali did have three drugs in “early clinical trials” a few months ago, though that number has now swelled to six according to their pipeline page. A key part of their drug discovery is their work with degenogenes, which are the genes that, when mutated, create a major risk factor for neurodegenerative diseases — and they are also, as you might imagine, very focused on delivery of drugs to the brain across that blood-brain barrier, either through molecule design or with various proprietary “transport vehicles” they have developed to deliver larger molecules to the brain.
“But that is now further than I should have gone in talking about the science part of this, because I’m a low-functioning idiot in that area and still get a nervous twitch when I picture my high school chemistry teacher. Suffice to say that yes, they are a high-profile R&D company trying to develop drugs and drug-delivery systems for neurodegenerative diseases.
“On the financial side, they’ll probably always be a tempting takeover target because they have a strong team and are addressing some very large potential markets (meaning, there are a ton of people suffering from Alzheimer’s, Parkinson’s, Lou Gehrig’s Disease and the others they’re trying to treat, so the bucket of gold at the end of the “FDA approval” rainbow is a large one), but they’re also still very high risk because they’re at the very first stages of clinical trials.”
This is still an area where I claim idiocy, and Denali is now a $9 billion company with a lot of fans and has a pretty active pipeline of early-stage drugs — their Alzheimer’s Disease drugs are not really the focus at the moment, we haven’t yet seen any clinical trial results from those (the first one is in Phase 1 now, with initial safety data expected in the second half of this year, the second will probably see an IND filed within a year or so and, if successful, should begin Phase 1 trials soon after). It will be many years before they have a drug in Phase 3 trials for possible approval, most likely, but they do have $1.5 billion in cash and can certainly keep plugging along — so it’s really just all about the science. They’ve got the backers, they’ve got their unique technology and their pipeline of drugs in the clinic that have attracted partners (including Sanofi, Takeda and Biogen), and we’ll start to find out in the next couple years if their drugs represent real hope for Alzeimer’s (or, perhaps a little more likely in the near future, Hunter Syndrome, ALS, and Parkinson’s Disease).
If you’d like to begin to dig into this story a little more, their latest Investor Presentation outlines their partnerships, clinical programs and transport technology (across the blood-brain barrier) pretty well. The pipeline is growing, the partnerships are strong, the initial clinical trial data seems promising for Parkinson’s Disease and some rarer neurodegenerative disorders, and it’s mostly a waiting game. There are no financial results that are likely to really matter for the next couple years — they will get some revenue, mostly from partners who are funding them with milestone payments, but that kind of funding is not steady and the profit they posted in 2020 was a one-time flareup from the Biogen agreement they signed last Fall, which generated more than $300 million in revenue for the fourth quarter… they’ll likely be burning through a good chunk of their $1.5 billion in cash over the next few years as expenses ramp up considerably with later-stage clinical trials, but they’ve certainly got plenty of funding for now — if you’re interested in this company watch the clinical results, not the income statements.
I tend to avoid investing in clinical-stage biotechs, mostly just because the science is not my specialty and I don’t like the fact that I’d almost certainly be buying shares from people who understand the business a lot better than I do, but I know we’ve got a lot of biotech enthusiasts among the great Gumshoe readership, so please do feel free to chime in and let us know if you think Denali’s on the right track… or if it’s too popular for its own good. Thanks for reading!
P.S. Yes, Bezos did invest in Denali Therapeutics when it was still private. That was reportedly one of the investments from his Bezos Expeditions venture fund back in 2015 or 2016, along with other biotechs he has backed, including Juno Therapeutics (bought by Celgene a few years ago) and Unity Biotechnology (UBX, often teased but now crushed by the failure of their first clinical trial). I don’t know if he has done anything with that position in the meantime. Bezos has invested in dozens of private and public companies, all of which pale in comparison to the billion or so dollars he spends each year funding his Blue Origin space company and, of course, the nearly $200 billion worth of Amazon shares he still owns and which, most days, still put him atop the “Richest Man in the World” standings. So in context, his investment in Denali is about on par with a person with a $1 million 401(k) betting $650 on a penny stock.
Disclosure: Of the companies mentioned above, I own shares of Amazon. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.
You just have to look at The Gates foundation to see evidence of billionaires wasting billions without return and in some cases causing net harm. Granted a small percentage of those billions when partnered with competent programs now do have net benefits. Bill was taken for the ignorant patsy he was for over a decade before he caught on.Likewise Bezos investing in something he doesn’t understand doesn’t mean squat. DNLI is all theoretical at this point. . I’ll look a little deeper and consider a small investment in lieu of blowing a few thousand in Vegas.
You’ll be burned in Vegas and burned in Trading, just send me a check and be happy
Denali does have a drug, DNL 151, that penetrates the blood-brain barrier. It targets a gene that can lead to Parkinson’s. – not Alzheimer’s. Looks to me that if DNL 151 amounts to anything, Biogen will reap a big part of the profits. But if Denali can tinker with agents so that they can pass the blood-brain barrier, that could be valuable — a long way down the road !
Michael, based upon your assessment, it appears that you feel an investment in DNLI is considerably premature.
Regards,
Frank
Travis: Thank you for the venture funding update and some background on Denali Therapeutics and their scientific research of the Blood Brain Barrier (BBB).
LLY has an AD drug candidate in Ph2 clinical trials, donanemab, “a humanized IgG1 MoAb directed at an N-terminal pyroglutamate Amyloid-Beta epitope present only in established Amyloid plaques. Donanemab is specific for this epitope and shows no off target binding to other A-Beta species, neurotransmitters, or their receptors, and has no known symptomatic effect.” Quite an impressive achievement in disease therapy targeting specificity- if true.
Results of the LLY sponsored TRAILBLAZER-ALZ,a Ph2 multicenter, placebo controlled trial were reported in the NEJM May 6,2021 p1691. The article has a lot of important information about the efficacy and safety of Donanemab in a population 60-85 yo that had “early symptomatic, prodromal AD” based on validated clinical scores of cognition and life function, in particular, the iADRS (Integrated Alzheimer’s Disease Rating Scale).
After 72 weeks there was slowing of disease progression by iADRS scores compared to placebo group but insufficient change in outcomes to meet the primary objective of the trial.
Stabilization of the iADRS was noted during the first 6 months; but the graphs of five clinical outcome measures declined at the same rate (similar slopes) as the placebo group thereafter during the 76 week trial.
Of note was that 73% of the patients in the trial were APOE e4 carriers and had a baseline iADRS score of 106 (a 38 point drop from a top score of 144, 26%). A majority were taking Acetylchloinesterase inhibitors.
Biomarkers of Disease outcomes included Florbetapir PET scan loads for both Amyloid Plaque and Tau neurofibrillary tangles, as well as, MRI volumetric changes for the Whole Brain, cerebral ventricles, and even the Hippocampus itself, the central registry of human memory, scattered throughout the functional modules of the brain.
The biomarkers in this clinical trial are revelatory of the futility of targeting Amyloid plaque alone as the primary or sole pathogenic factor of AD in patients with early or prodromal stages of the disease. Because even though the Donanemab group showed about 80% clearing of A-Beta plaques on PET scans, especially in the first 6 months, when the dosing was aggressive, and clinical function scores stabilized, the PET scan Global Tau Loads increased at a steep rate throughout the 76 weeks of the trial, while Whole Brain and Hippocampus volumes declined at the same rates as Placebo.
So in spite of proven Donanemab efficacy in clearing Amyloid Beta plaques by PET scan from the Brain, the Biomarkers and Clinical Scores of cognition and functionality still declined at the same rates as Placebo. Furthermore, the decline in clinical scores of cognition and life functionality parallel the rate of increase in the PET Global Load for Tau protein associated with neurofibrillary tangles.
The cost:benefit ratio for drugs that clear Amyloid Beta plaques in early -moderate stage AD is too expensive and more importantly implies a massive societal economic opportunity cost in the pursuit of a flawed or incompletely understood hypothesis of disease pathogenesis by approving drugs that miss the underlying cause of Alzheimer’s disease- a known unknown.
That’s certainly been at least part of the argument about Biogen’s drug, I’m hopeful it will help people but that cost/benefit tradeoff might be too dramatic to get to widespread use unless the results improve a lot as they begin actually selling it.
Cassava Sciences Thoughts? SAVA
How about AVXL? Should be first to market with an orally administered drug.
The constant ads by Google SUCK!
The next big thing in Alzheimer’s research, not a drug, a process ….
Halberd Corporation Alzheimer’s Disease Treatment Tests Yield Outstanding Results
https://www.biospace.com/article/releases/halberd-corporation-alzheimer-s-disease-treatment-tests-yield-outstanding-results/
John, it would appear that HALB has little credibility , even on the pink sheets, in that the stock is priced at 3 cents or I’m missing some crucial information.
Regards,
Frank
The issue with Alzheimer’s Disease (AD) drug treatment hopefuls doesn’t have much to do with whether or not someone has found a way to slip a useful molecule past the ‘blood brain barrier’ (yes, that was the ‘three word’ phrase). Aduhelm (originally aducanumab), did that. The problem is that the primary target of AD pharma research to date has been the removal of amyloid plaques. There’s a few problems with that.
Aducanumab Works But it Doesn’t
The drug was shown, unequivocally, to be capable of dissolving/removing plaque. It didn’t matter: patients’ AD continued to progress and mortality rates were unchanged.
Biogen Wasn’t Alone
By 2018 it was widely acknowledged that at least four therapeutic agents were capable of removing plaque: aducanumab, gantenerumab, Lilly’s LY3002813, and BAN2401. It was also known that none of them altered the course of AD.
https://www.alzforum.org/news/conference-coverage/four-immunotherapies-now-banish-amyloid-brain
In addition there’s “genetic evidence to suggest that preformed amyloid deposits can be completely reversed after sequential and increased deletion of BACE1 in adults” using a BRACE1 inhibitor.
https://www.lerner.ccf.org/news/details/?Turning+Back+Time%3A+BACE1+Inhibitor+Completely+Reverses+Amyloid+Plaques+in+a+Model+of+Alzheimer%27s+Disease&1ee3f054cdfb6edd7c53829a8f810880bf9c2f36&97193da396979772d8f4cbd802e3a1a73e15e41b
The Plaque Hypothesis is Dead
Cadaver studies found plenty of people who died of AD had no plaque at autopsy; too many who died with their minds sharp had heads full of it. Plaque may well be a symptom of AD; it does not appear to be the cause. The Plaque Hypothesis had been accepted wisdom since 1984. It’s now dead as a cadaver.
Why Pharma Was Unwilling to Give It Up
The pharma companies knew long before Biogen pulled the plug in 2019 that plaque wasn’t the problem, but they didn’t want to hear that: they had millions in sunk R&D costs & continued to irrationally hope Aducanumab or a similar drug would work anyhow. Sunk cost reasoning fallacy is a thing: no one wants to let go; the bigger the investment the longer they irrationally fight abandonment. That’s a useful thing to appreciate as an investor (we deal with it too). When you see it in the marketplace, pass on the stock (or short it).
Bitter Irony: We Already Had Therapy to Remove Plaque
As early as 2008 there was solid published research demonstrating curcumin crosses the blood brain barrier (not the rigid wall it’s often portrayed as) & dissolves amyloid plaque (& tau tangles). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5950688/
It’s also well documented that Vitamin D3 & omega 3 fatty acids can help the immune system clear plaque in the brain. https://www.medicalnewstoday.com/articles/255957
None of this got widespread attention & zero interest from the FDA because pharma companies can’t patent any of it.
Biogen is Selling Hope, Not Necessarily Effective Therapy
Biogen was able to re-submit its drug for use after initially withdrawing their application, & despite their clinical trials demonstrating it lacks efficacy, and after the target of treatment has been thoroughly proven to be a symptom, not a cause. I suspect this tells us more about the FDA & how it functions (especially who calls the shots) than it does about Aducanumab’s efficacy or Biogen’s prospects.
It Will Sell
Direct-to-consumer (D2C) advertising in the US ensures patients & their families will demand the drug: they want to believe something will help – though not likely outside the US (D2C ads are banned in Canada, the EU etc., & public health single purchasers won’t likely buy without proof it does anything useful).
So Biogen’s drug will sell; whether that’s beneficial in the long run is open to question. To the extent it sells it’ll enable Biogen to recoup the sunk cost of R&D and clinical trials, but that isn’t why you’d invest in it.
Is This a Good Thing?
Some analysts & writers in medical journals have expressed dismay that the FDA approved the drug. They worry any market success it has will reduce attention & research funding from renewed efforts by pharma firms to find treatment that does work.
Just When We Were Getting Somewhere…
There is now (post-2019) a better understanding of the causes of AD. It is better understood as a syndrome – a collection of symptoms – than as a disease. It’s not a disease in the traditional sense, as there is no widely accepted mechanism of cause & there appear to be a wide variety of of potential causes (metabolic, infection, injury, toxins, genes…). And for some of these models there appear to be therapies, including some drugs and as noted, a (very) few supplements, which may prove effective if paired with the right patient, early enough. To be fair, much of this was known but no one paid it much attention so long as the pharma industry was pursuing the Plaque Hypothesis: if you think you know what causes a disease & you’ve thrown vast amounts of money into therapeutic drug development, you don’t much care about useless information that you can’t, anyhow, own & monetize.
There needs to be a lot of research that involves therapeutic aids that can’t be patented. That won’t happen in the US, but in the EU in particular, good research can be funded by government outside the business model. Any success will take a long time to become widely known & used in the US without a profit incentive driving it. Perhaps longer if it has to fight well-funded marketing of patented drugs with questionable efficacy.
Does That Spell Investment Opportunity?
All of that may influence your assessment of Biogen’s potential with Aducanumab, and whether you think they have another blockbuster product.
Biogen is one of several companies that spent hundreds of millions pushing clinical trials forward despite knowing there were unpatentable therapeutics that could do exactly what they hoped their drugs would do, and continued long after it was apparent to anyone who trolled through medical research papers that the plaque hypothesis was doomed. That doesn’t inspire confidence for me in their business acumen. I’m not convinced there’s public utility in the drug which affects my ESG evaluation; that’s important to me but perhaps not to others. They’ve proven successful at convincing the FDA to let them try to recoup their losses; that doesn’t convince me the drug can be a blockbuster.
I subscribe to the adage that you don’t need a huge diversity of stocks to produce outstanding returns, but you do need to be pretty sure about the ones you pick. Despite Motley Fool’s need to hype a stock, Biogen doesn’t do it for me. I think there are other more promising opportunities.
Ignore all this baloney about AD. A spoonful of unsaturated coconut oil a day keeps the AD away
Recently, I took a shot on Unity Biotech (UBX) even though their trial one failed to revile significant results. There are currently (2) other scheduled Alzheimer’s trials with the FDA during this Calendar Year with modified inputs into their initial chemical profile. Even if only one of these two Pass Trial number (1)
this could very well predict a huge victory for Unity Biotech stock and many victims of this horrible disease
My Father and my Brother in law both died over the last 10 years following (3 and 8 years) respectively of
this disease. A cure could be the best news that we all should pray for.
BBB?…almost 65 indications including mTNBC, 22 Cancers, NASH, and LHaulers Covid-19…you may want to look at Cytodyn, inc. VYROlogix/Leronlimab/Pro140…Brazil trials, Philippines etc…and recently beat Activist group. DO your homework before it explodes.
I appreciate what you do. I would never fin d out what stock someone hypes, unless I pay through the nose, once a week and end up with fifty newsletters.
i fully agree with the previous statement thank you ery much