Biogen, Elan Skid on Drug News

Updated from 1:40 p.m. EDT

Disappointing test results for an experimental drug and slower-than-expected sales growth of a new psoriasis treatment helped drag down shares of Biogen(BGEN - Cramer's Take - Stockpickr) Thursday, even though the company posted a jump in second-quarter earnings.

Shares of Biogen closed at $38.70, down $2.48, or 6%, after falling as low as $38.33. However, the company reaffirmed its full-year earnings per share guidance of $1.72 to $1.85.

The experimental drug test news was even worse for Biogen's research-and-development partner Elan (ELN - Cramer's Take - Stockpickr), of Dublin, Ireland, whose stock ended at $4.47, down $1.99, or 30.8%.

Biogen's performance also helped depress shares of Idec Pharmaceuticals (IDPH - Cramer's Take - Stockpickr), the San Diego, Calif.-based biotechnology company with which Biogen announced a merger last month. Idec's shares closed at $34.11, down $1.94, or 5.4%.

The three companies' shares were rattled by the early morning announcement that a crucial test of the experimental drug Antegren had failed to meet certain guidelines in the treatment of Crohn's disease, a debilitating inflammatory gastrointestinal ailment that affects some 1 million people worldwide.

Based on the test results, executives of Biogen and Elan said they won't file an application this year with the Food and Drug Administration seeking marketing approval for Antegren for treating Crohn's disease.

The companies also are testing Antegren for the treatment of multiple sclerosis, and executives emphasized that the two MS studies are unaffected by the Crohn's disease test results. Another test of Antegren and Crohn's disease also continues.

The Crohn's disease setback comes during a Phase III trial, the final of three sets of tests to determine a drug's safety and efficacy before companies submit their experimental products for marketing approval to the FDA. (The other Crohn's disease study and the two MS studies of Antegren also are Phase III trials.)

In the case of Antegren and Crohn's disease, researchers said the results didn't meet certain goals established in the test guidelines. "This result appears to be due to a larger-than-expected placebo response rate," Biogen and Elan said in a press release. If there isn't a sufficient difference between a patient's response to an experimental drug and a placebo, the drug won't be viewed by regulators as worthy of marketing.