Approval Delay Casts a Shadow Over Idec's Shares

IDEC Pharmaceuticals (IDPH Quote - Cramer on IDPH - Stock Picks) was off more than 9% Friday as the approval delay for its cancer drug Zevalin sinks in with investors, and analysts go back to their chalkboards to rework the company's numbers.

The disappointing drug development news announced Thursday night cast a shadow on strong first-quarter earnings.

Shares in IDEC fell $4.69, or 9%, to $47.45 in Friday trading.

IDEC was not hit with any downgrades Friday, but analysts are making adjustments to their numbers to reduce the amount of Zevalin revenue expected this year and next. The anticancer drug was expected to be approved by U.S. regulators in mid- to late summer. Now, the most optimistic expectations see the drug getting the green light in the fourth quarter.

But it's not all bad news. Sales of IDEC's flagship cancer drug, Rituxan, soared in the first quarter, which could help offset any softness in Zevalin sales. IDEC shares Rituxan revenue with partner Genentech(DNA Quote - Cramer on DNA - Stock Picks).

Banc of America Securities analyst Eric Ende issued a research note today saying he didn't expect Zevalin to be approved until late December. That forced him to lower expected 2001 Zevalin revenue to $5 million from $32 million. As a result, he took down 2001 EPS estimates to 56 cents per share from 63 cents per share. He also lowered 2002 earnings estimates. Ende rates IDEC a strong buy and his firm co-managed the company's initial public offering.

Morgan Stanley analyst Caroline Copithorne also cut her Zevalin forecast in a Friday research note, but she upped her overall 2001 and 2002 earnings estimates because she expects 2001 Rituxan sales to reach $739 million, up from a previous estimate of $597 million.

IDEC and Genentech reported first-quarter Rituxan sales of $172.1 million, a 102% jump from the year-ago quarter.

Copithorne, who rates IDEC outperform, now sees the company earning 56 cents in 2001, a 5-cent rise from her previous estimate. Her firm doesn't do banking for the company.

Wall Street consensus calls for IDEC to earn 56 cents per share in 2001, according to Thomson Financial/First Call.