Tysabri Concerns Continue to Weigh on Biogen, Elan

Despite reporting strong quarterly revenues and earnings ahead of Wall Street estimates, shares in Biogen Idec (BIIB) fell 7% Tuesday and continued to fall in yesterday, down even further to a two-year low of $40.72.

With shares in one of Biogen Idec’s key partners, Elan (ELN), also down 12% since the interim results were announced, the main culprit appears to be ongoing concerns over the number of new patients receiving multiple sclerosis drug Tysabri in the wake of two new cases of PML reported in July. A review of archived consensus forecasts for the drug, provided by EvaluatePharma, suggests analysts remain sceptical about the companies’ optimistic goal of treating 100,000 patients with Tysabri by 2010; over the five-year period to 2012, $1.76bn has been wiped from consensus estimates since the PML safety scare.

Pessimistic outlook

The table below compares the most recent consensus forecasts for Tysabri with those available just before the safety scare on July 31. The reduction in forecasts over recent months is more dramatic considering analysts had significantly upgraded their estimates for the drug on July 22, following strong and encouraging second-quarter data.

		WW annual sales ($m)
Tysabri forecasts for:	Archive update date	2007	2008	2009	2010	2011	2012
Biogen Idec	Oct 2008	125	399	496	589	665	727
Elan	Oct 2008	217	391	508	583	669	731
Sum		343	790	1004	1173	1334	1458
Biogen Idec	Aug 2008 *	125	392	552	671	772	845
Elan	Aug 2008 *	217	459	682	882	1,059	1,200
Sum		343	851	1234	1553	1831	2044
Difference			-61	-230	-380	-497	-586
% change			-7%	-19%	-24%	-27%	-29%

* analyst consensus forecasts pre-date the new PML cases announced on 31 July.

Under the terms of a deal struck in 2000, Elan reports sales in the US and Biogen Idec books European and rest of world sales, with all profits shared equally.

Although Biogen Idec claims Tysabri will achieve a “run-rate” of $1bn by the end of 2008, the reality is that the latest quarterly results generates a moving annual sales total considerably lower at $726m. The most recent consensus suggests the drug will only just achieve $1bn in annual sales by the end of 2009.

Whilst the current outlook is pretty bleak, the fact that Tysabri’s third-quarter sales beat Wall Street estimates suggests the consensus could recover some of these losses. Analysts at Credit Suisse admit now that their massive downgrade in response to the new PML cases was “a bit draconian”. Nevertheless, the net effect of the safety scare is still likely to be significantly negative.

Focus on “new patient adds”

In Biogen Idec’s conference call yesterday to discuss its quarterly results, most analysts focused on the rate for new patient adds, which dropped to 215 per week in August and September, less than half the estimated 438 per week during the second quarter.

The new patient add rate is net of any patients who have discontinued treatment with Tysabri, which the company admitted had increased in recent months.

Although the significant share price losses for both Biogen Idec and Elan in the wake of the PML scare are probably overdone on the basis the drug’s label already includes strong warnings about the risk of PML, Biogen Idec appears not to be helping itself by consistently giving vague and opaque answers to direct questions from the investment community, apparent again on yesterday’s call (Elan and Biogen hurt by new PML cases and a lack of transparency , August 1, 2008).

The current financial turmoil means investors are more likely to be easily spooked by adverse and surprise events, suggesting the company should be trying its utmost to be as upfront and transparent as possible, so that when further cases of PML are reported, as seems inevitable, investors are well prepared.

Disclosure: none