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Biogen's Alzheimer's Drug Approval Puts Biotech ETFs in Spotlight

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Biogen (BIIB - Free Report) and its Japan partner Eisai have been dominating the headlines since the FDA granted accelerated approval to aducanumab, their investigational treatment for Alzheimer’s disease. This expensive and controversial drug has once again come in the spotlight as a 70-year-old man in the United States became the first person to receive an infusion of the drug outside of a clinical trial.

The approval of the first new drug to treat Alzheimer's disease in about 20 years has attracted investors’ attention toward the biotech sector. Notably, the Nasdaq Biotech Index surged 3.6%, witnessing the biggest jump since Nov 4 on the development. Moreover, the index was up 6% last week.

Biogen is expected to market the drug by the brand name of Aduhelm. It has been approved to reduce the accumulation of amyloid beta plaques, a sticky protein, in the brain, which is believed to lead to progression of Alzheimer’s disease.

Notably, the approval was based on data from the ENGAGE and EMERGE phase III studies and the phase Ib PRIME study in patients with early-stage Alzheimer’s disease. Data from these studies showed that Aduhelm reduced amyloid beta plaques by 59-71% at 18 months of treatment. In order to win continued approval, Biogen will have to verify the clinical benefit of the drug in a confirmatory study. Notably, the drug is very expensive as it will reportedly cost $56,000 a year.

Market Potential

Alzheimer's treatment could rake in huge revenues for Biogen given the huge size and potential of the market. In fact, Biogen’s shares rallied 38.3% after FDA approval was announced on Jun 7. The approval may also become a milestone and bring new hopes in for dementia treatment and a disease that costs approximately $259 billion annually to the United States, per a CNBC article. In fact, according to forecasts from the Alzheimer’s Association, more than 6 million Americans have Alzheimer’s or another form of dementia. The number is projected to climb to beyond 12 million people at a cost of $1 trillion annually, according to the same CNBC article as mentioned above.

Controversies Clouding Biogen’s Alzheimer’s Drug

The research in dementia treatment has been going on for several years. Several major drug companies have ceased efforts to research brain diseases, including Pfizer (PFE) and Boehringer Ingelheim in 2018, per a CNBC article. In fact, a 2018 analysis reflected that 146 experimental drugs had failed in clinical trials over the past 20 years, as mentioned in The Wall Street Journal article.

Considering the complexity of the research, Biogen’s Alzheimer’s drug has also seen its share of controversies. In March 2019, Biogen/Eisai had announced the discontinuation of ENGAGE and EMERGE studies as a futility analysis showed that these were unlikely to meet their primary endpoints.

In October 2019, Biogen revealed plans to pursue U.S. regulatory approval of aducanumab based on positive results of a new analysis of larger dataset, which became available after the discontinuation of the studies.

Notably, three members of the FDA panel supervising research have resigned since the approval. In fact, Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School, has stated in a letter the agency’s decision on Biogen “was probably the worst drug approval decision in recent U.S. history,” per a CNBC article.

Interestingly, the FDA approved Aduhelm despite an FDA advisory committee voting against its approval last November. The Peripheral and Central Nervous System (PCNS) Drugs Advisory Committee voted 8 to 1 with 2 uncertain that data from the EMERGE study on aducanumab (which had met the primary endpoint) does not provide strong evidence to support the efficacy of aducanumab for treating Alzheimer’s when viewed independently, regardless of data from the ENGAGE study (did not meet primary endpoint). The experts voted 10 to 0 with 1 uncertain that EMERGE could be used as primary evidence of efficacy in light of the negative ENGAGE study.

Biotech ETFs to Watch Out

Against the backdrop, let’s look at some poplar biotech ETFs that investors can keep an eye on:

VanEck Vectors Biotech ETF (BBH - Free Report)

The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. Its AUM is $549.3 million and it has an expense ratio of 0.35% (read: ETFs to Win as Moderna Seeks COVID-19 Vaccine Nod for Teens).

iShares Nasdaq Biotechnology ETF (IBB - Free Report)

This fund seeks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the Nasdaq Biotechnology Index. IBB has AUM of $10.52 billion with an expense ratio of 0.46% (read: Should You Buy Biotech ETFs Now?).

SPDR S&P Biotech ETF (XBI - Free Report)

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. Its AUM is $7.01 billion and expense ratio, 0.35% (read: 5 All-Star ETFs & Stocks to Buy on the Dip).

First Trust NYSE Arca Biotechnology Index Fund (FBT - Free Report)

The fund replicates as closely as possible, before fees and expenses, the price and yield of the NYSE Arca Biotechnology Index. Its AUM is $1.97 billion and it has an expense ratio of 0.55% (read: Top-Performing Biotech ETFs of Last Week).

Principal Healthcare Innovators Index ETF (BTEC - Free Report)

This fund invests in companies that are leading the charge toward innovative solutions rather than spending money on marketing and distribution by tracking the Nasdaq Healthcare Innovators Index. BTEC charges 42 bps in annual fees and has AUM of $161.8 million (read: 4 ETF Areas Surged Last Week).

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