Market Tempo

We aren't afraid to say it. For the past month, biotechs have been trading choppy as the market frets about drug safety with questions not only about currently marketed drugs such the highly publicized pain killer, Vioxx, but also about how safely drugs are developed. Resolution was in sight with a newly appointed FDA commissioner and a recent ruling clearing the way for Vioxx and other COX-2 inhibitors to remain on the market and it appears the FDA has been exonerated. Bottom line, society needs its medicines. Then on Monday, February 28, Biogen-Idec/NASDAQ: BIIB announced it voluntarily pulled its multiple sclerosis (MS) drug, Tysabri, after a patient died from using it in a combination treatment with Avonex for two years and another patient contracted a rare and often fatal disease, progressive multifocal leukoencephalopathy, a disease of the central nervous system. Both Biogen-Idec and its partner Elan/NYSE: ELN share prices took a dive. The news reverberated through the biotech sector pulling other biotech share price valuations down. Overall, this event as well as the Vioxx incident would more than likely influence how drugs will be safely developed.

So, what in store for Biogen-Idec's and Elan's, Tysabri? Tysabri has its merits as a drug to treat MS, but Wall Street assumed Tysabri was a slam-dunk that was once reflected in the share price for Biogen-Idec and Elan. Now the companies' share prices are in the extreme case and have been taken down several notches. There is a lot at stake and we need more medical facts. The drug is effective, but safety is now questionable. So far, there is one death and one serious adverse event recorded, and if it can be proven that both are isolated events, Tysabri will eventually return to the market. Biogen-Idec has not given any timeline when Tysabri could return to the market, but Elan hopes by late fall 2005. At the current price levels, there is a chance for Biogen-Idec and Elan to rebound as the story unfolds and there could be a happy ending. Expectations were high, not only for MS, but also for a variety other aliments such as Crohn's disease and rheumatoid arthritis. As you can imagine, Wall Street reacted to the news with a vengeance. It's an unfortunate event, but Biogen-Idec, Elan and the FDA are acting responsibly by protecting the patients.

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