Biogen Inc (NASDAQ:BIIB) stock is getting whacked in sympathy to Eli Lilly and Co (NYSE:LLY)‘s announcement that it has once again failed in its quest to prove solanezumab to be a viable treatment for Alzheimer’s patients.
Is The Hatchet Job On BIIB Warranted?
While trading in sympathy is common on Wall Street, it exemplifies the fact that the market trades in a herd mentality rather than focusing on individual stocks within a sector. In doing so, investors fail to identify and isolate promising candidates from those that have just experienced failure. However, the “shoot first and ask questions later” sellers offer patient investors significant and discounted buying opportunities.
Biogen Inc (NASDAQ:BIIB), for instance, is clearly on a more defined and promising track than Eli Lilly and Co (NYSE:LLY) ever dreamed of being. In September of 2016, BIIB was granted fast-track designation for its Alzheimer’s treatment, aducanumab. The stock advanced on the announcement with good reason and the unwarranted plunge this morning may have overthought the Eli Lilly and Co (NYSE:LLY) relationship.
The fast-track designation offers an expedited pathway to bring new treatments and therapies to market that treat serious and unmet medical conditions.
Data from previous aducanumab trials indicate that the drug is showing promising results and efficacy in patients with the disease. BIIB’s aducanumab targets beta amyloid plaques that scientists believe to be a leading cause of the disease.
BIIB Phase III Trials, Billions In Potential
Biogen Inc (NASDAQ:BIIB) is conducting two phase III trials to assess aducanumab’s safety and effectiveness in slowing the decline in cognitive ability in patients with early stage Alzheimer’s. In its prior trials, aducanumab demonstrated statistically significant improvement in slowing the decline in cognitive ability in patients compared to a placebo group. The results are promising, however, BIIB still needs to evaluate safety, since several patients had adverse effects during the trial and BIIB needs to eliminate aducanumab as the primary contributor of those reactions.
Nevertheless, investors have embraced the aducanumab results and looked past the potential adverse effects for the time being. It demonstrates just how eager investors are to urge a treatment forward that may finally substantiate years of clinical research and hundreds of millions of dollars in capital.
If BIIB can prove aducanumab to be an effective treatment for Alzheimer’s, the market can be worth billions.
Disclosure: I have no position in any stock mentioned and no plans to initiate any positions within the next 72 hours.
I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.
About the Author:
Kenny Soulstring is an entrepreneurial visionary with a thirty year history developing and operating small to mid sized businesses. His experience in building a brand led to his interest in investing in small and emerging companies, and for the prior twenty years, his investments allow him to take part in new ventures without undertaking all of the legwork. Focused on finding compelling opportunities in the small cap sector, Soulstring enjoys the art of the build, watching a company develop from concept to maturity. His frequent contact with company management allows him to offer timely and relevant information, working to keep news fresh with a spicy commentary to match. Soulstring was raised in Miami Beach, Florida and plans to retire there when his hair turns fully gray.
Note: This article is written by Kenny Soulstring and was originally published at CNA Finance.