The Alzheimer's Funding Dilemma: Is the Cost of Innovation Worth the Cure?

The UK's National Institute for Health and Care Excellence (NICE) has once again ignited a firestorm in healthcare investing by rejecting Eli Lilly's donanemab (Kisunla) and Eisai's lecanemab (Leqembi) for NHS funding. While the drugs represent breakthroughs as the first disease-modifying therapies for Alzheimer's, NICE's decision highlights a critical truth: not all innovation is investable. The rejection underscores a systemic clash between rising drug prices, stagnant healthcare budgets, and the urgent need for therapies that deliver measurable, cost-effective value. For investors, this isn't just a regulatory setback—it's a roadmap to profit in dementia therapeutics.

The Cost-Benefit Imbalance: A Cautionary Tale for Pharma

NICE's rejection hinges on two pillars: modest clinical benefits and staggering cost inefficiencies. Let's break them down:

1. Efficacy vs. Real-World Impact:
   Both drugs slow cognitive decline by 4–7 months in clinical trials—a “small” gain for a disease that typically progresses over 10+ years. NICE's draft analysis deemed this insufficient to justify the price tag. Even the EU's initial rejection of lecanemab in 2024 (later reversed) mirrored this calculus.

1. Costs Skyrocketing Beyond R&D:
2. Direct treatment costs: Lecanemab's annual cost in the U.S. is ~£20,000, but NHS estimates climb due to mandatory monitoring (e.g., MRIs to detect ARIA, a brain swelling side effect).
3. Indirect risks: 24% of donanemab patients and 12.6% of lecanemab patients experience ARIA, requiring costly interventions.
4. ICER (Incremental Cost-Effectiveness Ratio) for both drugs is 5–6x above the NHS's £30,000/QALY threshold.

The Implications: A New Era for Drug Pricing

NICE's stance signals a global shift: value-based pricing is here to stay. Investors must ask: Can pharma adapt to this reality?

• Market Access Pressure: Denials in Europe and the UK could force companies to slash prices or partner with governments on outcome-based deals.
• Pipeline Priorities: Late-stage therapies must prove they deliver more than marginal gains or face similar rejections.
• Equity Risks: Without NHS funding, patients face a “pay-or-suffer” dilemma, fueling demand for affordable alternatives.

Investment Angles: Where to Play the Dementia Therapeutics Opportunity

The rejections highlight two paths to profit:

1. Late-Stage Pipelines with Better Cost-Effectiveness Profiles

• Biogen's Buntanetap: A dual amyloid/tau antibody in Phase 3 trials. Early data suggests it may outperform lecanemab/donanemab while requiring fewer MRIs.
• Remternetug (Lilly): A next-gen antibody targeting soluble amyloid, with a Phase 3 readout expected in 2025. Its subcutaneous delivery could slash administration costs.
• Novo Nordisk's Semaglutide: A diabetes drug repurposed for Alzheimer's (Phase 3 ongoing). If approved, its existing cost structure and oral dosing could make it a NHS-friendly option.

2. Partnerships That Reduce Costs or Improve Efficacy

• Diagnostics First: Companies like Eli Lilly (Lilly) and Roche are developing blood-based biomarkers to identify early-stage patients. Targeted treatment could reduce trial failure rates and lower costs via early intervention.
• Manufacturing Synergies: Generic drugmakers (e.g., Teva Pharmaceutical) could capitalize on eventual price erosion of biologics like donanemab.
• Managed Access Deals: Firms like Eisai might collaborate with NHS on risk-sharing models, where costs are tied to patient outcomes.

Risks to Watch

• Regulatory Pushback: The EU's revised Health Technology Assessment rules, effective 2025, could amplify pressure on drugmakers to justify prices.
• Pipeline Failures: If remternetug or buntanetap miss endpoints, investors may sour on amyloid-targeting drugs entirely.
• Geopolitical Shifts: China's push to fast-track Alzheimer's therapies (e.g., Green Valley's gantenerumab) could undercut Western drugmakers' pricing power.

Conclusion: Invest in Value, Not Just Innovation

NICE's decision is a wake-up call: the era of pricing drugs based on R&D costs alone is ending. Investors should prioritize firms with therapies that achieve clinically meaningful outcomes at sustainable costs. For now, the stars are Biogen (BIIB) and Novo Nordisk (NVO), while Lilly's stock volatility offers a contrarian play if managed access deals materialize. Meanwhile, the hunt for non-amyloid targets (e.g., tau, inflammation) remains a high-risk, high-reward frontier.

In the end, the Alzheimer's market is at a crossroads. Those who bet on value—and not just novelty—will be the winners.

Data queries and visualizations powered by YCharts and NICE guidance documents.