Drug debacle may drag down biotech industry

Shares of Biogen, the third largest biotech company behind Amgen and Genentech Inc., closed at $38.65 on the Nasdaq Stock Market on Monday, losing $28.63. Biogen’s previous 52-week low was $50.87.

Until Monday, Biogen was a biotech darling and among the top performing biotechnology stocks over the last 10 years, returning more than 65 percent since 1995, according to Morningstar Inc.

Elan closed at $8 on the New York Stock Exchange, losing $18.90 a share. The share price of a third biotechnology company, Protein Design Labs, expected to share in the sales of Tysabri, fell 14 percent to close at $13.56 on the Nasdaq.

The FDA approved the drug in November and Tysabri accounted for $3 million in sales for Biogen in 2004 while Elan rang up $6.4 million in sales in the fourth quarter, counting on Tysabri to help restore it to profitability by next year.

Elan chief executive Kelly Martin told reporters in Ireland on Monday that the drug has been withdrawn as a precaution and that the companies hope to resume marketing it later this year.

The companies said the decision came after recent reports of two cases of serious effects among patients who used the drug along with Avonex, Biogen Idec’s earlier MS treatment, in clinical trials.

“At this stage it’s not a huge impact on the current prospects of either company,” said Biogen chief executive Jim Mullen “But it’s safe to say there was a lot of expectation around Tysabri for both corporations.”

Mullen had earlier forecast that Tysabri sales would reach $1.5 billion annually by 2007.

“It’s definitely possible it does not make it back on the market, if it does its market potential is reduced,” said Jason Kantor, an analyst with WR Hambrecht & Co. “I think this is something of a permanent black eye.”

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