Updated from 8:28 a.m. EDT

Biogen

(BGEN)

is finding competition to be more painful than it previouslyforecast, forcing the biotech company to slash earnings estimates for thesecond time in six weeks.

Spurred by slowing sales of its multiple sclerosis drug Avonex, Biogensaid Friday it expects to earn between 28 cents and 32 cents a share in thecurrent quarter, down from its previous estimate, a range of 37 cents to 41cents a share.

For the full-year 2002, Biogen says it expects profits to reach a rangeof $1.30 to $1.60 a share, again, lower than previous forecasts of a rangeof $1.70 to $1.80 a share.

Shares of Biogen fell 14% to $40.96 at the opening of Friday trading. The stock has since rebounded slightly and is now down $6.04, or 13%, to $41.66.

The culprit: Weaker Avonex sales that are being hurt bynew competition from Rebif, a rival MS drug from Swiss biotech firm

Serono

(SRA)

that hit the U.S. market in March.

Biogen now says it expects second-quarter Avonex sales to reach a rangeof $170 million to $180 million, or $20 million less than expectations.

For the full year, Biogen said it now expects between $730 million and$750 million in U.S. Avonex sales, compared with 2001 U.S. Avonex sales of$711 million. Overall, the drug's 2002 growth rate worldwide has been cutto an average of 8% from previous forecast of 15%.

Like we said at the top, Friday's earnings warning is an encorepresentation for Biogen. The company reduced current estimates for thefirst time in late April, after making an early assessment of the expecteddamage caused by Rebif and pledging to ramp up spending to kick start anaggressive sales and marketing effort.

For those keeping score at home, Biogen has now reduced 2002 earningsestimates from a high of $2 per share P.R. (that's pre-Rebif) to thecurrent $1.30 to $1.60 a share estimate.

Analysts had been expecting Biogen to earn 40 cents per share in thecurrent quarter and $1.72 per share in 2002, reduced from 47 cents and$1.87 per share, respectively, in late April, according to ThomsonFinancial/First Call.

On a conference call with analysts, Biogen executives blamed the Avonex shortfall on slowing growth in the overall multiple sclerosis market, which is causing wholesalers to reduce Avonex inventory levels from 15 days to 10 days, thereby cutting into sales. Citing data from drug research firm IMS Health, Biogen said the MS drug market will now grow in the low double-digit range in 2002, compared to 20% growth in 2001.

Several analysts on the call questioned these assumptions, finding it particularly coincidental that the MS market would slow and wholesalers would be reducing inventory levels of Avonex at exactly the same time that a new drug, Rebif, entered the U.S. market.

Biogen CEO Jim Mullen did not deny that Rebif was having some impact on Avonex sales, but he insisted patient demand for Avonex remained strong and that the company didn't have the market research data on hand yet to accurately predict if Rebif was stealing patients away significantly from Avonex.

Last month, Biogen did receive some good news about its psoriasis drug,Amevive, when a Food and Drug Administraton advisory panel recommended itsapproval. The FDA is expected to issue its final decision on Amevive in August.

On the conference call, Biogen CFO Peter Kellogg said the company is expecting an FDA decision on Amevive by the end of the year, although the decision could come sooner. Biogen said it would provide guidance for 2003 after the Amevive decision.