FDA's Serono Approval Starts the MS Drug Wars Early

Let the multiple sclerosis drug wars begin.

Friday, Swiss biotech firm Serono (SRA Quote) said it has received Food and Drug Administration clearance to sell its MS drug, Rebif, in the U.S., allowing it to compete directly against rival Biogen (BGEN Quote) and its drug, Avonex.

Serono was able to use data that showed Rebif is superior to Avonex to break Biogen's orphan-drug status in the U.S. more than a year ahead of schedule. The orphan status grants seven years of market exclusivity to drug companies that develop expensive drugs for relatively rare diseases. Avonex's exclusivity was scheduled to expire in May 2003.

Both companies already compete in Europe, where they each have about 30% of the market.

Shares of Serono rose $3.25, or 16%, to $22.84 in recent Friday trading; Biogen shares sank $4.75, or 8%, to $51.65.

Serono says it is ready to launch Rebif in the U.S. within days, and that it hopes to capture about 25% of the $1.3 billion market here within four years. Biogen, which racked up $711 million in U.S. Avonex sales last year, responded by stating that although it's disappointed with the FDA decision, it is ready to compete and believes Avonex will remain the market-leading MS drug in the U.S.

Other MS drug competitors include Betaseron, marketed by German drug firm Schering AG, and Copaxone, sold by Israel's Teva.

Drug Donnybrook

Rebif's entry into the lucrative U.S. multiple sclerosis market portends a fierce marketing battle between Biogen and Serono. Biogen has long maintained that its drug is more convenient -- it's given by a once-a-week injection vs. three times a week for Rebif. Avonex is also safer, Biogen claims.

But Serono will certainly counter with new claims that Rebif is more effective than Avonex, using the results of a head-to-head comparative study. Serono may also try to grab quick market share by forcing Biogen into a price war. The big unanswered question will be just how many current Avonex patients switch to Rebif.

On a conference call Friday morning, Biogen said it was putting its revenue and earnings estimates under review, but it was not ready to announce any changes.

Biogen has stated previously that it expects to earn between $1.90 per share and $2.00 per share in 2002, bolstered by Avonex revenue growth of 15% to 18%. These figures did not factor in Rebif competition.

For 2003, the company said earnings growth should reach 20% on Avonex sales growth in the high single digits.

Biogen CEO Jim Mullen said these forecasts could change based on how much the company will spend to boost its marketing budget this year to compete against Serono.