On July 12th, 2021, the US Centers for Medicare & Medicaid Services (CMS) announced the commencement of a National Coverage Determination (NCD) analysis of Biogen Inc’s (NASDAQ: BIIB) controversial Alzheimer’s drug Aduhelm.

The NCD review is expected to take between six and nine months and will determine the drug’s eligibility for national coverage under the Medicare Advantage program, as well as any additional coverage restrictions under government-sponsored programs.

The process includes the review of clinical evidence, published clinical studies, professional society guidelines and public comments before a determination is made.

Despite the worrisome headline, Jefferies analyst Michael J. Yee sees this development as positive. In his view, the announcement marks “another overhang to be resolved” which “will help BIIB stock climb the wall of worry.”

The analyst believes the announcement was to be expected and currently models “that CMS will reimburse for mild pts (or at least through cont'd reimbursement but with CED or coverage w/ evidence development, as data evolves). CMS previosly reviewed "beta amyloid" PET testing and concluded reimbursement OK but w/ CED pending more data (e.g., a new Phase III for PET testing was started by CMS).”, as he maintains a “Buy” rating and $500 price target on the shares.

Robyn Karnauskas at Truist Securities also views the development as “a good thing for BIIB.”

She goes on to point out that NCD guidelines have to be followed by Medicare Advantage. Thus, if the NCD turns out in BIIB’s favor, the program would by law be obligated to reimburse all eligible patients – something that remained uncertain prior to the formal review process.

The analyst models that nearly 85% of patients will be covered by the government programs and a favorable NCD decision will mark an important step towards large scale Aduhelm’s uptake.

Truist Securities maintains a “Buy” rating and a $647 Price Target on the shares.

Written by Vlad Schepkov | [email protected]