Rapidly aging populations pose a huge challenge to society, governments and public services. Older populations put an immense strain on healthcare expenditure, and the financial costs of dementia are large and growing.

That’s due to the fact that people with dementia, including those with Alzheimer’s disease, are projected to increase from 50+ million now to more than 150 million in 2050, according to Alzheimer’s Disease International.

These startling huge numbers underline the enormous potential for any drug that can treat Alzheimer’s successfully. And these drugs could end needless suffering of Alzheimer’s patients and their families.

Although many people with dementia prefer to live at home, when this is not possible they are placed in care facilities: about 70% of nursing home residents have a cognitive impairment.The OECD (Organization for Economic Cooperation and Development) has pointed out that “the vast majority of long-term care facilities remain poorly designed for people with dementia”. According to the OECD, staff are severely undertrained on dementia care.

The end result? An over-reliance on anti-psychotic medications to treat behavioral and psychological symptoms of dementia. For example, anti-psychotic use increased by a third between 2011 and 2015, despite “widespread clinical agreement that anti-psychotic medications should not be used to manage most difficult behavior in dementia”, says Elina Suzuki, author of the OECD report.

So, the need for drugs that actually treat Alzheimer’s itself is obvious. Enter…

Biogen/Eisai Lecanemab

A FDA advisory panel recently paved the way for the full approval of lecanemab, an Alzheimer’s disease treatment developed by Biogen (BIIB) and Japanese drugmaker Eisai (ESALY).

The FDA had already given the drug a provisional green light in January under its Accelerated Approval pathway. Following the unanimous vote by the advisory panel on the clinical benefits of the drug, the FDA is set to make a decision by July 6 on whether to grant full approval.

The treatment, marketed as Leqembi, is a biological medical product shown to reduce plaques of amyloid beta — a protein that accumulates in the brains of those with the degenerative disease. In a clinical trial whose results were announced in 2022, lecanemab was shown to slow the rate of cognitive decline by 27% in 1,800 patients.

An earlier Biogen-Eisia treatment for Alzheimer’s disease — aducanumab, marketed as Aduhelm — received accelerated FDA approval in 2021. But phase III clinical trials were discontinued after an independent data-monitoring committee indicated in 2019 that they “were unlikely to meet their primary endpoint upon completion.”

However, there are several features that could back widespread adoption. Lecanemab is not taken by mouth, but has to be infused into the patient every two weeks. Diagnostic tests — brain scans and/or lumbar punctures — are required to determine eligibility for treatment. And the drug is not a simple chemical but an antibody, expensive to develop and produce. . .that translates to a cost of about $26,500 a year per patient.

Eli Lilly’s Donanemab

There’s another headache for Biogen too. . .competing drugs are entering the space. Foremost among these is donanemab from Eli Lilly (LLY).

On May 3, Lilly said it will apply for regulatory approval (by the end of June) of an Alzheimer’s drug that a clinical study showed can slow the progress of cognitive decline in patients in the early stages.

For patients in a late-stage trial (1,182 people with early-stage Alzheimer’s, and 552 people with a later stage of the disease), donanemab slowed progression of the disease by 35% compared with those who took the placebo during an 18-month treatment period. The decline in patients’ ability to perform daily tasks was 40% lower for those on the drug.

However, the drug displayed severe side effects such as brain swelling and bleeding and three people on the trial died. A potential side effect associated with Biogen’s lecanemab was amyloid-related imaging abnormalities with edema, or fluid formation on the brain.

Outlook for These Drugs and Companies

Both Lilly’s and Biogen’s work by reducing the build-up of sticky plaques in the brain known as beta-amyloid, which are at the center of a scientific debate about what causes Alzheimer’s disease.

The aforementioned Alzheimer’s Association said the results from the Lilly trial were the “strongest” released to date for an Alzheimer’s drug and suggested an “inflection point” had been reached for treatment of the disease.

However, scientists remain cautious. Here’s why. . .despite near total removal of amyloid plaque, the disease still did progress, although at a much slower rate than without treatment.

That’s has me leaning towards being cautious, so I will ignore Eisai, which only has a C POWR Rating (Hold). I would rather own Lilly and/or Biogen.

Lilly is more attractive with a B POWR Rating (Buy). The Quality score is the area where LLY ranks best, ranking ahead of 94.16% of US stocks. Its strongest trending metric is Stability; it’s been moving up nicely over the last 178 days.

LLY has a market capitalization of $429.8 billion which brings with it a degree of safety. Yet when you note the 45% gain over the past year and 23% year-to-date, you appreciate its investment potential. Also helping LLY is the excitement over its weight-loss drugs.

Biogen has a Strong Buy A POWR Rating. BIIB scores best in the Value area, with a Value rank ahead of 95.43% of US stocks.

In terms of twelve month growth in earnings before interest and taxes, Biogen is reporting a growth rate of 132.96%; that’s higher than 89.9% of US stocks. And in comparison to the median Healthcare stock, BIIB’s price/sales ratio is 15.69% lower, now standing at 4.3.

BIIB has a market capitalization of $40.76 billion which has ballooned 32% over the past year with most signs pointing to even more upside ahead.

Either BIIB or LLY look like good investments at current prices. You should consider if they have a place in your portfolio.

What To Do Next?

BIIB shares were trading at $281.45 per share on Tuesday afternoon, down $0.13 (-0.05%). Year-to-date, BIIB has gained 1.64%, versus a 14.67% rise in the benchmark S&P 500 index during the same period.

About the Author: Tony Daltorio

Tony is a seasoned veteran of nearly all aspects of investing. From running his own advisory services to developing education materials to working with investors directly to help them achieve their long-term financial goals. More...

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