- Biogen and the Japanese pharmaceutical company Eisai said Thursday they would discontinue their late-stage Alzheimer's drug trials.
- Shares of Biogen crashed 28%, wiping out around $16 billion of market value.
- This outcome was "investors' worst fears come true," Guggenheim told clients.
- Watch Biogen trade live.
Biogen shares crashed more than 28% Thursday morning, wiping out around $16 billion of market value, after the biotech company and Eisai, a Japanese pharmaceutical company, said they would discontinue two late-stage Alzheimer's drug trials.
The two companies said they would scrap their global late-stage trials, ENGAGE and EMERGE, designed to "evaluate the efficacy and safety of aducanumab in patients with mild cognitive impairment due to Alzheimer's disease and mild Alzheimer’s disease dementia."
The recommendation to halt the studies was not based on safety concerns, the companies said.
"This disappointing news confirms the complexity of treating Alzheimer's disease and the need to further advance knowledge in neuroscience," Biogen CEO Michel Vounatsos said in a release. "We are incredibly grateful to all the Alzheimer's disease patients, their families and the investigators who participated in the trials and contributed greatly to this research."
Wall Street analysts were immediately downbeat on the announcement, and highlighted just how much hope investors had pinned on these trials.
Biogen shares have proved resilient in recent months due to "hope/speculation" and investors' "can't miss it" feeling around the trials, Stifel analysts led by Paul Matteis wrote in a note. The firm maintained its "hold" rating and $346 price target — nearly 50% above Thursday's price of around $231 a share.
Indeed, this outcome was "investors' worst fears come true," Guggenheim analyst Yatin Suneja wrote in a note to clients out Thursday.
"While unfortunate, we are not particularly surprised as numerous AB-targeting compounds have failed to demonstrate benefit in Alzheimer's patients, and, in our view, this trial may signal the end of the current AB hypothesis of Alzheimer's etiology," Suneja added, reiterating the firm's "neutral" rating and $325 price target.
Thursday's sell-off made for Biogen's largest downside gap since August 2008, when the stock traded under $50, according to Bespoke Investment Group. At the time, there were safety concerns over the future of the multiple sclerosis drug Tysabri, which Biogen and the Irish drugmaker Elan were trialing.
Biogen has lost 23% so far this year, including Thursday's plunge.
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