By Val Brickates Kennedy, MarketWatch

Last Update: 7:53 PM ET Jan. 10, 2006

SAN FRANCISCO (MarketWatch) -- Executives for Biogen Idec said Tuesday that they expect the U.S. Food and Drug Administration to make a decision by the end of March to clear the market return of the company's recalled drug, Tysabri.

In a presentation before investors at the annual J.P. Morgan Healthcare Conference, Biogen
executives said that the FDA is scheduled to rule by March's end on whether to approve new labeling for Tysabri that would warn the drug has been linked to an extremely rare but deadly brain disease called PML. Tysabri was approved in late November 2004 by the FDA for the treatment of multiple sclerosis.

Biogen and partner Elan Pharmaceuticals voluntarily pulled Tysabri from the market in February 2005 after three cases of PML were reported. Two of the patients died. About 3,000 patients had taken the drug before it was recalled.

The drug's recall surprised both medical experts and Wall Street analysts, many of whom had hailed Tysabri as a wonder drug in the treatment of MS. Industry watchers had predicted that Tysabri, which appeared to be more effective and better tolerated than existing MS treatments, would greatly expand the market for MS drugs. Currently, many MS sufferers eschew drug treatment due to the unpleasant side effects of the drugs.

Since that time, Biogen and Elan have been conducting an exhaustive safety review of the drug to determine how the drug can be mostly safely prescribed to MS patients. The companies filed last fall to have the drug approved with a new label that discusses the risks of contracting PML, a disease that generally occurs in patients whose immune systems are severely compromised.

According to Biogen Chief Executive Jim Mullen, the new label will dictate that Tysabri should only be used "with great caution" by people whose immune systems are already comprised, such as with immunosuppressant drugs.

Mullen reiterated that the company expects to be able to have the drug back on the market by midyear. He added that Biogen was in discussions with health insurers about how the new labeling will affect coverage.

Biogen's executive president for development, Burt Adelman, added that the label also will contain information supporting Tysabri's unusually high effectiveness in slowing down the progression of MS.

In addition, Adelman noted that many of the leading drugs used to treat MS can also cause dangerous side effects. The one great exception, he said, is a group of drugs known as interferons, which includes Biogen's widely prescribed Avonex.

Tysabri had been considered to be superior to interferons because it did not cause the flu-like symptoms associated with those drugs and appeared to be far more effective.

Mullen said that the company expects to have the FDA hold a special advisory-panel meeting on the matter. He added that a major topic of the meeting will likely be what sort of language should be included on the label about diagnosing and treating PML in its earliest stages. The FDA has not yet contacted Biogen about scheduling such a meeting, according to Mullen.

Biogen's chief financial officer, Peter Kellogg, declined to speculate on what sales of a newly-launched Tysabri might look like. "Until we all know the new label, we can't estimate," he said.

Prior to its recall, analysts had predicted that Tysabri could have peak sales upward of $2 billion a year.

Val Brickates Kennedy is a reporter for MarketWatch in Boston.

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