Shares of major biotech company Biogen (NASDAQ: BIIB) fell on Friday, not so much due to a problem with their own drug, but rather that a close rival who was producing a similar treatment decided to stop the project.
Biogen’s main competitor, AbbVie (NASDAQ: ABBV), revealed in an earnings call that morning that the company has stopped the trial for a drug targeting a rare brain disease known. Biogen also happened to be developing a similar drug, with this news raising fears about whether it will end up being a failure as well.
Investors have been worried about Biogen for a while, whose shares fell significantly in March after the failure of a previously exciting Alzheimer’s drug. Despite the company reporting strong earnings this week, share prices barely responded as investors remained anxious overall.
Their worries seemed to be justified, as Abbvie reported that a drug they were developing targeting a rare brain disease called progressive supranuclear palsy (or just PSP), was halted following a “futility analysis” that showed the drug wasn’t really doing anything.
With Biogen developing its own PSP drug, investors are worried this drug also will end up as a failure. Their version, called BIIB0902, is currently being tested among patients and results will be expected sometime this year.
“Expectations are low. But I think it serves to highlight the risk to this trial, and the overall riskiness of the back half of 2019 events for [Biogen] overall,” said RBC Capital Markets analyst Brian Abrahams according to Barrons. “They’ve certainly been talking it up,” added PiperJaffray analyst Christopher Raymond said of Biogen’s management in an interview. “Just given that fact that management has talked about it as much as they have, I think it’s a big focus.”
The question essentially boils down to how similar Abbvie and Biogen’s drugs are. Many times two competing companies could develop compounds remarkably similar to each other, but in other times, they might end up tackling a disease from an entirely different angle.
It’s definitely possible that Biogen could hit a home run where Abbvie has failed. However, most analysts agree that it’s hard to make any judgment calls given the lack of clarity of the specifics behind the two drug candidates.
Shares of Biogen dipped Friday morning, declining by around 2.5 percent before recovering some of that loss by the end of the day. Over the past six months, the company has seen a dramatic spike drop in March when news of their Alzheimer drug came out, shedding almost one-third of the company’s stock price. Since then, shares have stayed relatively the same.
