Brain Infections Sink Elan, Biogen

Biogen Idec (BIIB) and Elan (ELN) sank hard and fast in post-market trading Thursday, after a regulatory filing confirmed two cases of an often deadly brain infection in multiple sclerosis (MS) patients treated with Tysabri.

The cases are the first confirmed since approval of the drug in the European Union and the re-entry of the drug into the U.S. market two years ago. Tysabri was previously removed from the market after being linked to progressive multifocal leukoencephalopathy (PML), but has since been relaunched with a warning on the label.

Elan shares, already battered earlier in the week following the presentation of mixed data on its experimental Alzheimer's drug bapineuzumab, were tumbling $8.45, or 42.1%, to $11.60 in after-hours trading. Biogen shares were sinking $14.26, or 20.4%, to $55.50.

According to the 8-K filing, the cases were both in MS patients in the EU who were treated in the commercial (or nonclinical trial) setting. The patients were on the drug for 17 months and 14 months, respectively. Currently one patient is clinically stable and ambulatory at home and the other is hospitalized.

Reports of a suspected case on an Adverse Event Reporting System (AERS) database surfaced in recent weeks, sparking investor concern. But fears were temporarily allayed last week when the company said on its earnings call that there have still been no confirmed cases including assessment of that case.

"We've said in the past, and the FDA has also said, as is clearly stated in our label that we've anticipated seeing additional cases of PML," Biogen Idec spokeswoman Naomi Aoki said Thursday night. The label currently indicates that the expected rate is 1 occurrence in 1,000 patients, which was calculated at the time of the drug's reintroduction to the market.

As of the end of June, more than 31,800 patients were on commercial and clinical Tysabri therapy worldwide. Deutsche Bank analyst Mark Schoenebaum estimates that there are 14,000 patients who have been on the drug for more than a year, and there have been four PML cases observed in MS patients and one in a Crohn's disease patient.

"In all fairness to the company and the drug, we knew this was expected at some point," said Summer Street analyst Carol Werther, who has a neutral rating on Biogen shares. "I expect we'll see more cases before the end of the year, but even so it may still be the amount that's within the label -- but it clearly isn't going to make your average community doctor more comfortable."

Along with the discomfort comes investor concern. "We expect the stock to open sharply down on Friday, but would not be buyers as we think investor sentiment could continue to weaken," said Deutsche Bank's Schoenebaum, who has a hold rating on the stock.

Tysabri isn't alone when it comes to instances of PML. There have been a number of other immunosuppressant drugs linked to PML, noted Summer Street's Werther, including Genentech ( DNA) and Biogen Idec's Rituxan. Also, the Food and Drug Administration issued a communication on May 29, following a review of postmarketing reports of PML in patients who took Roche's CellCept and Novartis' ( NVS) Myfortic, drugs used to keep the body from rejecting transplant organs.

"We have the TOUCH safety program in the U.S. and we have a risk management program in Europe, and we've done a lot of work to make sure that treating physicians know how to spot signs of it," says Aoki. "Our feeling has been that heightened clinical vigilance is the best way to monitor for PML and that certainly was the case with these two patients."

As Elan and Biogen got hammered after-hours, shares of Teva Pharmaceutical ( TEVA) -- which markets Copaxone, an MS drug with a different mechanism of action from Tysabri -- were up 58 cents, or 1.3%, at $45.42.


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