DNA's Rituxan Flunks MS Trial

Updated from 7:06 a.m. EDT

Rituxan is an ineffective treatment for primary progressive multiple sclerosis, according to results of a phase III clinical trial released Monday night by the drug's makers Genentech(DNA Quote - Cramer on DNA - Stock Picks) and Biogen Idec(BIIB Quote - Cramer on BIIB - Stock Picks).

The failed study is a setback to the companies' efforts to expand Rituxan use into new autoimmune diseases, although it was widely acknowledged that Rituxan faced long odds because primary progressive multiple sclerosis (PPMS) is an intractable disease in which many drugs have failed to show efficacy, including drugs used very successfully to treat other forms of multiple sclerosis.

The study enrolled 439 patients with PPMS and randomized them to receive four intravenous courses of Rituxan six months apart or a placebo. At the end of 96 weeks, however, Rituxan failed to slow the course of the disease compared to placebo, the companies said.

Genentech and Biogen Idec reported 2007 Rituxan sales of $2.29 billion in the United States, primarily as a treatment for the blood cancer non-Hodgkin's lymphoma. The drug is also approved to treat rheumatoid arthritis.

The failure of Rituxan in the PPMS trial shouldn't impact earnings of either company since the high-risk nature of the trial dissuaded most analysts from including revenue in their financial models.

A positive result could have added between $250 million and $400 million annually to the Rituxan franchise, according to various analyst estimates.

In multiple sclerosis, the body's own immune system is thought to attack myelin, a fatty, protective sheath that surrounds nerve fibers in the brain and spinal cord. A breakdown in myelin, therefore, damages underlying neurons and interferes with electrical signals that the brain sends through the spinal cord to the rest of the body.

PPMS accounts for about 10% of the estimated 400,000 people with multiple sclerosis in the United States. It is considered a more severe form of the disease because patients tend to lose motor function, experience muscle tremors and numbness steadily over time.

By contrast, patients with relapsing, remitting multiple sclerosis, or RRMS, the most common form of the disease, experience the same degenerative symptoms, but the disease can wax and wane, with patients suffering periods of exacerbation followed by recovery.

Drugs like Biogen Idec's Avonex and Tysabri and Teva's(TEVA Quote - Cramer on TEVA - Stock Picks) Copaxone are effective in treating RRMS, but not PPMS for reasons scientists don't fully understand.

A phase II study presented last year showed Rituxan to be effective in treating RRMS. This study offered some reason for optimism that Monday's PPMS trial would also be successful.

Genentech and Biogen Idec are studying Rituxan in patients with lupus, another hard-to-treat autoimmune disease, with results expected within the next few weeks.

Prior to the Rituxan announcement, Genentech shares closed Monday down $2.10 to $74.69. Biogen Idec shares were off 50 cents to $63.72.

Know What You Own: DNA operates in the biotechnology and healthcare sector, and some of the other stocks in its field include Amgen(AMGN Quote - Cramer on AMGN - Stock Picks), Bristol-Myers Squibb(BMY Quote - Cramer on BMY - Stock Picks) and Glaxosmithkline(GSK Quote - Cramer on GSK - Stock Picks). These stocks were recently trading at $43.02, +0.16%, $21.59, +0.19% and $42.49, +0.35% respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.