Updated from 9:26 a.m. ESTGenentech ( DNA) and Biogen Idec ( BIIB) said the Food and Drug Administration approved Rituxan, currently a lymphoma treatment, for moderate to severe rheumatoid arthritis. The drug would be used in combination with methotrexate, a standard treatment for rheumatoid arthritis. The Rituxan-methotrexate regimen would be for patients who haven't adequately responded to prior drug therapies or who are too sensitive to receive another medication, including Amgen's ( AMGN) Enbrel, Centocor's Remicade or Abbott's ( ABT) Humira. To determine what constitutes a subpar response to a previous treatment, doctors and patients used subjective measures like fatigue, the ability to perform daily tasks and the number of swollen joints a patient had, according to Genentech medical director Sunil Agarwal. "The FDA approval of Rituxan for RA marks an important milestone in our ongoing efforts to advance the understanding of B-cell-mediated autoimmune diseases," Genentech said in a statement. "This milestone, coupled with the
Genentech's shares fell 43 cents to $85.26 Wednesday. Biogen Idec shares lost 50 cents to $46.75. The sales teams of Genentech and Biogen have been at the ready ahead of the new approval, but Rituxan will be facing stiff competition for acceptance in the rheumatoid arthritis market. Bristol-Myers Squibb ( BMY) recently had a drug called Orencia approved for the same disease. Bear Stearns biotech analyst Mark Schoenebaum says the new approval should be good for the earnings of both Genentech and Biogen. Every additional $100 million in sales of Rituxan could mean an added 2 cents to 3 cents for Genentech's earnings and an extra 6 cents for Biogen. Schoenebaum reiterated his outperform rating on Genentech and set a price target of $98 by the end of 2006. He predicts the new indication will garner an additional $200 million in revenue in 2006, but that amount should triple by 2010. Last year, Rituxan brought in $1.8 billion in sales. Genentech and Biogen have been noninvestment-banking clients of Bear Stearns in the last 12 months. Michael King of Rodman & Renshaw didn't seem terribly impressed by what the new approval will mean for Biogen. King says that while Biogen's stock might rise in the near term, "we see little to drive meaningful growth in BIIB shares." Rodman & Renshaw doesn't have an investment-banking relationship with Biogen but is seeking one. Separately, RBC Capital Markets maintained its sector-perform rating on Biogen, but did raise its price target on the stock to $54 from $41. Meanwhile, research firm Thomas Weisel said in a report that the approval will have a limited impact on Biogen and Genentech. The firm said it believes Rituxan could collect $500 million in sales as a treatment for rheumatoid arthritis. Still, Weisel said conversations with doctors lead it to believe that neither Rituxan nor Orencia has a big advantage over the other.