Positive News for Biogen & Elan

Biogen Idec (BIIB - Analyst Report) and Elan Corporation, plc (ELN - Snapshot Report) recently announced that the US Food and Drug Administration (FDA) has approved a label change for Tysabri. As per the updated label, anti-JC virus antibody status is a risk factor for developing progressive multifocal leukoencephalopathy (PML), a rare and life threatening brain infection. This step will enable doctors to assess the patients’ risk benefit matrix better.

Tysabri is approved in the US for relapsing forms of multiple sclerosis (“MS”) in patients who show inadequate response to or are unable to tolerate other treatments. In the EU, Tysabri is approved for highly active relapsing-remitting MS (“RRMS”) in adult patients who have severe RRMS or have failed with beta interferon treatment.

In the EU, Tysabri was approved in 2006, while in the US, Tysabri was initially approved in 2004. The product was withdrawn from US markets in 2005 due to the PML concern. The drug was reintroduced by Biogen and Elan after a year with a strict warning regarding the occurrence of PML.

So far, three factors have been identified which increase the risk of PML in MS patients taking Tysabri. Presence of anti-JC virus antibody, prior treatment with immunosuppressants and treatment duration with Tysabri are the three factors influencing the risk of PML

Last year, the European Commission (“EC”) had approved an update to Tysabri’s label in the EU. The updated label includes anti-JC virus antibody status as an additional factor that could help stratify the risk of PML occurring in patients treated with Tysabri. Apart from approving the label update, the EC also renewed the five-year Marketing Authorization for Tysabri in the EU.

We are pleased with the Tysabri label update in the US. We believe product sales will increase as doctors grow more confident about the drug and its risk.

Biogen and Elan have an agreement for the development and commercialization of Tysabri. Under the terms of the agreement, Elan markets the drug in the US and books the entire sales as its revenues.

Outside the US, Biogen is responsible for distribution, and Elan records as revenue its share of the profit or loss on these sales of Tysabri. This collaboration agreement provides Elan with the option to buy the rights of Tysabri if Biogen changes hands.

Our Recommendation

We currently have a Neutral recommendation on Biogen, which carries a Zacks #2 Rank (short-term Buy rating). Key products Avonex and Tysabri should continue contributing significantly to sales. BG-12 should help drive long-term growth. Meanwhile, Biogen’s restructuring initiative should help drive the bottom line. We are also pleased with Biogen’s intention to streamline its pipeline. However, we are concerned about the increasing competition in the MS market in the form of Novartis’ (NVS - Snapshot Report) Gilenya which is competing directly with Avonex and Tysabri. The MS market could become more competitive with the entry of oral treatments being developed by other companies.

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