Biogen, Elan Skid on Drug News - TheStreet

Biogen, Elan Skid on Drug News

Test results for the companies' joint treatment for Crohn's disease don't meet expectations.
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Updated from 1:40 p.m. EDT

Disappointing test results for an experimental drug and slower-than-expected sales growth of a new psoriasis treatment helped drag down shares of

Biogen

(BGEN)

Thursday, even though the company posted a jump in second-quarter earnings.

Shares of Biogen closed at $38.70, down $2.48, or 6%, after falling as low as $38.33. However, the company reaffirmed its full-year earnings per share guidance of $1.72 to $1.85.

The experimental drug test news was even worse for Biogen's research-and-development partner

Elan

(ELN)

, of Dublin, Ireland, whose stock ended at $4.47, down $1.99, or 30.8%.

Biogen's performance also helped depress shares of

Idec Pharmaceuticals

(IDPH)

, the San Diego, Calif.-based biotechnology company with which Biogen announced a merger last month. Idec's shares closed at $34.11, down $1.94, or 5.4%.

The three companies' shares were rattled by the early morning announcement that a crucial test of the experimental drug Antegren had failed to meet certain guidelines in the treatment of Crohn's disease, a debilitating inflammatory gastrointestinal ailment that affects some 1 million people worldwide.

Based on the test results, executives of Biogen and Elan said they won't file an application this year with the Food and Drug Administration seeking marketing approval for Antegren for treating Crohn's disease.

The companies also are testing Antegren for the treatment of multiple sclerosis, and executives emphasized that the two MS studies are unaffected by the Crohn's disease test results. Another test of Antegren and Crohn's disease also continues.

The Crohn's disease setback comes during a Phase III trial, the final of three sets of tests to determine a drug's safety and efficacy before companies submit their experimental products for marketing approval to the FDA. (The other Crohn's disease study and the two MS studies of Antegren also are Phase III trials.)

In the case of Antegren and Crohn's disease, researchers said the results didn't meet certain goals established in the test guidelines. "This result appears to be due to a larger-than-expected placebo response rate," Biogen and Elan said in a press release. If there isn't a sufficient difference between a patient's response to an experimental drug and a placebo, the drug won't be viewed by regulators as worthy of marketing.

Researchers pointed out that there were "no notable differences in the overall rates of side effects" between Antegren and the placebo through 12 weeks of testing.

"We will meet with regulatory authorities to discuss these data and determine the most appropriate path forward," said Dr. Lars Ekman, executive vice president of research and development for Elan.

Antegren has shown early promise in these two diseases because of its affect on the body's immune system, preventing certain cells from leaving the blood stream to provoke or maintain inflammation in the gastrointestinal tract -- for Crohn's disease -- or in the brain for MS.

"The most important data is for MS," said Craig West, a biotechnology analyst for A.G. Edwards & Sons in St. Louis. "I think MS would be the more important indication. MS is in Biogen's power alley."

That's because Biogen's most important product is Avonex, an MS treatment whose worldwide sales reached $286 million (including $196 million in the U.S.), a 14% gain over the same period last year. Avonex accounted for 88% of Biogen's second-quarter revenue. (One of the Antegren tests uses the experimental drug in combination with Avonex.)

West said it's not possible to tell if the Crohn's disease presents any hints for the MS results. "It's also possible that the other Crohn's disease study could resurrect" Antegren's prospects with the FDA, he said.

West, who rates Biogen as a hold, doesn't own shares. A.G. Edwards is a market maker in Biogen securities.

West said Biogen's stock also weakened due to lower-than-expected sales from Amevive, an injectable bioengineered drug for psoriasis. The company cut its year-end sales guidance on Amevive to a range of $50 million to $70 million from an earlier prediction of $85 million. The company reported $7 million in Amevive sales for the second quarter.

West said it is difficult to predict how well a bioengineered drug will do in a treatment arena where there has never been a biotech drug -- both in how doctors will react and how insurers will respond to a treatment that he estimates costs $7,000 to $10,000. He added that Biogen will be under severe pressure to expand Amevive's usage this year because the FDA is considering several new products for the psoriasis market.

For the three months ended June 30, Biogen reported net income of $57.87 million, up 33% from $43.38 million for the same period last year. Earnings per share came in at 38 cents, up 31% from 29 cents in the same period last year. Twenty-six analysts polled by Thomson First Call were expecting EPS of 36 cents. Total sales climbed 21% to $325.65 million from $269.26 million.