Serono Talks Up Biogen Challenge, but Analysts Question Its Potential

Updated from 10:51 a.m. ET

Swiss biotech firm Serono(SRA Quote - Cramer on SRA - Stock Picks) took a shot at rival Biogen(BGEN Quote - Cramer on BGEN - Stock Picks) Tuesday, but investors discounted the challenge.

As expected, Serono took the wraps off a research study that claims its multiple sclerosis drug Rebif is more effective than a drug sold by Biogen.

But Serono was cagey about releasing actual data from the study, which left many analysts skeptical. Biogen, whose stock had been hit after Serono earlier this month signaled its intent to release the study, opened lower but rebounded. It closed up $2.28, or 4.1%, to $58.52. Serono closed up $1.27, or 5.5%, to $24.18.

Serono intends to use the study to petition the Food and Drug Administration for permission to sell the drug in the U.S., possibly by mid-2002. If approved, Rebif stands a chance of taking significant market share from Avonex, the top-selling MS drug sold by Biogen, and its main money maker.

Avonex currently enjoys "orphan status" in the U.S., which blocks competition until 2003. By law, Serono must prove that Rebif is more effective than Avonex to crack the U.S. market before then. And the U.S. market is a juicy target -- Avonex sales are projected to reach $900 million in 2001.

The Serono study results released Tuesday showed that patients treated with Rebif have a 90% chance of remaining relapse free compared to patients being treated with Biogen's Avonex. These patients all suffer from relapsing remitting MS, the most common form of the disease.

Patients treated with Avonex had 50% more new lesions in the brain than those treated with Rebif, Serono also claims.

But on a conference call with analysts Tuesday morning, Serono executives wouldn't discuss the actual data that created the basis for these results. Also off the table were details about the design of the study and whether the FDA was ready to automatically green light the results. Instead, Serono executives said complete details would be released at a major medical conference in June.

This reticence didn't sit well with analysts on the call, which was a bit comedic, with analyst after analyst asking pointed questions about the study's data and design, and Serono executives repeatedly refusing to answer the questions.

Serono will have a tough time convincing the FDA to pull orphan status from Avonex even with the study, said Eric Shen, a biotech analyst with Robertson Stephens. Instead, Serono most likely will end up selling Rebif in the U.S. starting in 2003, Shen said.

"I think Rebif could take market share away from Avonex with new patients, but I doubt whether existing Avonex patients will switch drugs," he said. (Shen rates Biogen a buy, and his firm hasn't done underwriting for the company.)

Serono already sells Rebif in 67 countries, posting global sales of $254.2 million last year.