I got several reader questions this week about a new recommendation from Dave Lashmet at Stansberry — it looks like this was issued as a recommendation for regular Stansberry Investment Advisory subscribers, not one of Lashmet’s more expensive biotech-focused newsletters, and it’s very light on clues… but let’s see if we can give you anything helpful to think about.
This is what I’m getting as clues from our readers:
“In this new special report from our biotech expert Dave Lashmet, The Next 4X Jump in Biotech: How to Profit Off the First Potential $1 Trillion Drug Franchise in History, we’re recommending a company that’s developing a drug to potentially treat one of the causes of Alzheimer’s. And in a few years, it could have several other Alzheimer’s drugs, too.
“This biotech company has the first drugs, the most drugs, and the best drugs… And we believe investors today could enjoy returns of 300%.”
So that’s probably not enough in the way of clues for us to give you a definitive answer… but we can sniff around a little.
There are several large pharma companies who are involved in late-stage Alzheimer’s Disease trials, and even a few small ones (though the little guys rarely make it through to Phase 3 or approval on their own). The list of companies that I’ve run across who are either in or close to beginning Phase 3 trials, and therefore could possibly be called “first,” includes…
- Roche’s (RHHBY) gantenerumab (partnered from Morphosys (MOR)) — this one failed in one study in February, but is still in some larger Phase 3 trials that haven’t reported results yet. They’ve also got crenexumab and some other earlier stage drugs in Phase 1 or 2 with an Alzheimer’s focus, though that’s not a huge focus of the company and Roche is gigantic (with a $300 billion market cap), so imagining it providing 300% gains is tough.
- Eisai (ESALY) and Biogen’s (BIIB) BAN2410 and aducanumab, that partnership’s third Phase 3 drug, elenbecestat was halted in Phase 3 for safety last fall
- Eli Lilly and Co. (LLY), whose solanexumab has disappointed with recent “did not meet primary endpoint” results… and while it would be hard to say that’s “the best drug” they do at least have several others in the pipeline in Phase 1 and 2.
- TauRx, which is studying its tau inhibitor LMTX in phase 3 trials… though that’s not a public company.
- AC Immune (ACIU), which is going to have some key data readouts for its several Alzheimer’s drugs this year, most of which are partnered with big players (Genentech ,Janseen, LIlly, etc.), though it would be a stretch to call them “first” since their lead drug, Semorinemab, has yet to begin Phase 3 trials.
- Levetiracetam, an epilepsy drug that’s generically available for that purpose but is being tested in low-dose form for Alzheimer’s by Agenebio (AGB101), though that’s really their only drug in the clinic and they’re tiny and private still, with funding recently coming mostly from grants.
- Amilomotide (CAD106) from Novartis (NVS), which seems to be an immunotherapy for Alzheimer’s — similar to Roche in that it has some appeal, but Novartis is so big that it takes a lot to generate big stock gains and even an appealing Alzheimer’s drug might not bring a 300% return to a $200 billion company.
- Axsome’s (AXSM) AXS-05, which reported some great results this week and saw the shares soar, though that’s another symptom palliative for Alzheimer’s that doesn’t get at the real disease. Their drug is primarily aimed at depression, but also showed good signs of treating agitation in Alzheimer’s Disease patients, which could certainly be a game-changer for quality of life for those patients and their families.
- COR388 from Cortexyme (CRTX), currently enrolling Phase 2/3 — but that’s their only drug in the clinic right now.
- And our old friend Anavex (AVXL) is still out there — Anavex 2-73 was teased as a breakthrough billionaire-maker a few times over the years (most ardently by Ray Blanco)… they have some other early stage compounds that are still preclinical for Alzheimer’s, Anavex 3-71 and Anavex 1-41, but really the stock is riding on AVX 2-73… and they are currently enrolling Phase 2b/3 for that one (along with Phase 2 trials for Rett Syndrome and Parkinson’s), though despite the long wait (they started their first clinical trials a dozen years ago now, I believe), they won’t likely have Alzheimer’s data this year (they will have some results from the other two Phase 2 studies, which are shorter).
The nub with Anavex, for me, is that despite being teased as a savior for years now, only a few people have ever received the drug in Alzheimer’s Disease trials (I believe that number is 48, assuming no overlap between Phase 1 and Phase 2 patients)… which means, to me at least, that the data is extremely hard to trust. This next trial they’re enrolling now (delayed a bit because of the coronavirus impact, which is obviously making access to elderly patients more challenging), is of 450 patients with an initial term of 48 weeks, so maybe there will be some real news by this time next year.
Merck’s (MRK) verubecestat, but that’s pretty much their only Alzheimer’s drug, it has disappointed once already (like Biogen and Lilly)… and they’re huge.
I’ve probably missed a few late-stage drugs, in which case you can feel free to catch me up with a comment… and there are, of course, plenty of earlier stage Alzheimer’s Disease drugs out there — including some that get touted and teased from time to time, like those of Denali Therapeutics (DNLI) and ProMIS Neurosciences.
But by process of elimination, I think we’re really just looking at Biogen (BIIB) if you want to bet on a company releasing the first new Alzheimer’s Disease drug, and with a pipeline of several other Alzheimer’s drugs in development behind that.
Is that really what Lashmet is touting? I can’t be certain, not with squishy terms like “first” and “best,” but that’s the best guess.
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We do know that Stansberry has covered Biogen pretty ardently for several years, and that Lashmet teased the stock as the most compelling Alzheimer’s story back in 2017, after previously teasing Biogen’s partner Eisai a year earlier. He has also been quoted in free Stansberry articles about the rejuvenation of aducanumab last Fall, when it rose almost from the dead, and then in January in a short piece about BIIB’s earnings — here’s a quote from that:
“Lashmet said he’s optimistic about the drug’s chances:
‘Biogen can apply to the FDA in mid-2020 to win approval by year’s end. And we think the trial results should be good enough for the FDA, since there’s no other real treatment and this is a fatal disease.’
‘Aducanumab is working,’ he added.”
I am no expert on the science and haven’t really followed the details of the clinical trials, but Biogen is pretty appealingly valued and therefore probably a more reasonable risk than most if you want to bet on an Alzheimer’s Disease stock… though there are plenty of open questions about whether any of these drugs that go after amyloid plaques will end up making a difference.
The downside risk for Biogen, outside of Alzheimer’s, has mostly been tied to the possible end of their patent protection on their lead Multiple Sclerosis drug Tecfidera, and serious competition for their muscular atrophy drug Spinraza. Biogen won the Tecfidera fight in court over Mylan’s patent challenge earlier this year, so that’s a big positive (that was more than 30% of revenue last year), though the market for multiple sclerosis drugs is apparently more competitive now and Biogen’s newer drug apparently isn’t selling as well as competitors in that space… and Spinraza’s new competition from Novartis could also reportedly eat into sales. The “uh oh, without aducanumab Biogen is toast” stories ran pretty freely last Spring and Summer, so if the drug fails again for any reason we’ll see those concerns magnified.
It’s true that Biogen is trading at a discount based on their current earnings… it’s also true that a discount is pretty rational, since most people seem to think they’re going to continue to see flat or declining revenues in their core products. So despite pretty solid financials (no growth, but good earnings), it looks like Biogen stock, despite the solid income statement today and their large $50 billion market cap, might be more of a bet on aducanumab and that uncertain Alzheimer’s future than you’d assume at first glance. Still, if aducanumab works as well as is hoped and becomes the first real treatment for Alzheimer’s, that could easily be enough to double or triple the market cap — a strong enough drug for Alzheimer’s that offers hope to patients and families, and is safe enough for mass prescribing could, depending on pricing (always a key), be the biggest selling drug in history thanks to the massive pent-up demand.
Biogen is a large and active company with a neuroscience focus, they do have five other drugs in Phase 3 trials outside of the Alzheimer’s business, and a dozen or so in Phase 2, so this is not a “bet it all” moment, not with annual sales already of $14 billio, but certainly if aducanumab fails to get approval or loses investor confidence again along the way the stock will fall hard — as it did last summer, when the announced failure of aducanumab caused the stock to lose about 30% of its value (only to regain most of that when Biogen brought it back six months later after more study, and the optimism returned in October).
The Tecfidera patent win is a net positive, but revenue growth was only 1% last year so they weren’t exactly setting the world on fire… which is why, of course, it trades at less than 10X sales. Analysts see no earnings or revenue growth for the next three years… which is OK if some growth comes after that because of aducanumab or some other new and appealing drug approval, and maybe they can boost that a bit with their stock buybacks, but the rest of the business is probably not enough to get the stock moving higher in the absence of some Alzheimer’s enthusiasm.
I have resisted betting on Alzheimers’ Disease drugs in the past, just becuase the failure rate is so high, but Biogen is probably the least risky speculation in that space right now — it won’t go up 1,000% like some junior biotechs might on the strength of an exciting clinical trial, but it won’t fall by 90%, either. And none of this is brand-new or dramatic, I’d be surprised if Stansberry’s Investment Advisory, with Lashmet working behind the scenes for years now and being a longtime fan of Biogen, hadn’t recommended the stock in the past as well.
The current disappointment for Biogen shareholders is that the expectation that they would file for FDA approval for aducanumab was previously “early 2020,” and when they reported earnings last week they started shifting that to “expects to complete the US filing for aducanumab in third quarter” … though that latest earnings update also surprised on the upside, with a little more revenue growth than anticipated, and Biogen has been tossed in the ring as a sort-of coronavirus treatment stock as well (they’re partnering with Vir on potential COVID-19 antibody therapies), so it’s hard to say what’s going to move the shares on any given day.
And with that, dear friends, I’ll send it back to you — think Biogen is an appealing speculation with some Alzheimer’s upside (and downside)? Prefer somebody else in this space, or perhaps shy about dipping a toe in this historically shark-infested pool of ALzheimer’s cure hopefuls? Let us know with a comment below.