Three Strikes for Elan

"Back to the old Biogen," says Mark Schoenebaum, of Bear Stearns, in a March 31 report. That means the company must rely on its two biggest drugs -- the MS medication Avonex and the non-Hodgkins lymphoma drug, Rituxan, which Biogen Idec sells in partnership with Genentech(DNA).

These drugs "are mature but healthy," he says. He says that Biogen Idec, which has a "clean" balance sheet, still can produce more than $2 billion in revenue this year.

"The death of Tysabri was not greatly exaggerated," says Schoenebaum, who has an underperform rating, and was one of the many analysts who downgraded Biogen Idec after the initial Tysabri announcement. Wednesday's revelation "supports our thesis that any road back to the market for Tysabri will be extraordinarily long and difficult." He doesn't own shares; his firm is a market maker in the stock and also has a non-investment banking relationship with Biogen Idec.

Like Schoenebaum, Elise Wang of Citigroup Smith Barney has removed Tysabri from her financial models. If Tysabri ever receives FDA approval, its use would be severely restricted and its label would contain a "black box" warning, the strongest notice from the FDA.

Wang, who has a buy rating on the company, sees a potential buying opportunity amid all the misery. "We believe current stock levels are attractive, given our estimate of a base valuation of $42 without Tysabri," she says. She doesn't own shares; her firm doesn't have an investment banking relationship.

Checking Patients

It will take several months for Elan and Biogen Idec to review all the data from clinical trials. On Wednesday, they said the third case of PML was detected as part of this review.

They said this patient had received eight doses of Tysabri over 18 months. The companies said the patient also had a history of taking "multiple courses of immunosuppressant agents." They didn't provide details, but such drugs are used to treat people with inflammatory diseases like MS and Crohn's disease as well as people who have received organ transplants.

The companies are working with investigators to evaluate the approximately 3,000 patients in multiple sclerosis, Crohn's disease and rheumatoid arthritis trials.

"The results of this safety evaluation will be discussed with regulatory agencies to determine possible reinitiation of dosing in clinical trials and future commercial availability," they said.

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