Monday, December 17, 2007

Biogen drug pipeline makes it a tempting target - International Herald Tribune

Friday, December 7, 2007

SAN FRANCISCO: Biogen Idec is building a pipeline of drugs for multiple sclerosis, a disease that stumped scientists for years, making it an attractive takeover target for the billionaire investor Carl Icahn and competitors led by Pfizer.

Driven by the success of its injectable treatment Tysabri, which could generate $2.8 billion in sales in 2010, Biogen is testing five experimental multiple sclerosis therapies. Each fights the nerve disorder in a unique way and each could add annual sales of $1 billion, said Jason Kantor, an analyst at RBC Capital Markets in San Francisco.

Biogen's market value has jumped 50 percent this year, and analysts see it as a takeover target by companies in need of new products, including Pfizer and Sanofi-Aventis. The purchase price may reach $90 a share, a 21.6 percent premium from the closing price Wednesday, as acquirers assess earnings potential for next year and Biogen's research pipeline, said Geoffrey Porges, an analyst at Sanford Bernstein in New York.

"If you're a large drug company, and you don't have a significant biotech portfolio, this is an intriguing opportunity," Porges said in an interview. He sets the company's possible purchase price at $80 to $90 a share.

Biogen, based in Cambridge, Massachusetts, has a price-to-earnings ratio of almost 32, the second-highest after Celgene among biotechnology companies with a market value of at least $10 billion. Analysts say the surge has been justified, with 19 of 27 surveyed by Bloomberg recommending that investors hold the stock. Celgene, a cancer biotechnology company based in Summit, New Jersey, has a price-to-earnings ratio of 72.

Biogen said in October that it was considering a sale of the company after the investor Carl Icahn made a $23 billion bid, and other potential, but unspecified, buyers expressed interest. Icahn said at the time that the company was worth more, and that it should be an attractive target for large drug makers.

Pfizer, in New York, Sanofi-Aventis of Paris and GlaxoSmithKline of London may be interested in acquiring Biogen, analysts say. The drug makers declined to comment.

Biogen is also not commenting on any potential acquisition, said Amy Reilly, a company spokeswoman.

"Biogen has cast an extremely broad net to capture whatever might be useful in the future of MS," Kantor, the RBC analyst, said, referring to multiple sclerosis. He sets the company's purchase price at $90 a share. "Having a pipeline like this means that on a yearly basis these guys will have another at bat, a chance to hit a home run that could move the stock."

Multiple sclerosis, a neurological condition that can harm speech, vision and movement, affects an estimated 2.5 million people worldwide. The market for MS drugs exceeded $5.5 billion in 2006 and is expected to double by 2013, according to Frost & Sullivan, a New York-based market research company.

One of Biogen's two drugs in late-stage testing is vying to be the first oral pill against multiple sclerosis. Biogen researchers believe the compound, BG-12, works by tamping down inflammation, while also protecting healthy cells. It would be used for relapsing, remitting multiple sclerosis, which affects about 85 percent of patients, according to the National MS Society.

Another approach, also in final patient testing, uses the cancer drug Rituxan against primary, progressive multiple sclerosis, a condition in which the disease worsens over time and for which there is no effective treatment. Rituxan, co-developed by Genentech of San Francisco, is currently approved for non-Hodgkin's lymphoma and rheumatoid arthritis. It works by stopping the growth of B-cells, white blood cells that researchers say may be overactive in multiple sclerosis.

Further back in development is a novel drug that inhibits the activity of a molecular switch called Lingo-1. By turning off Lingo-1, scientists say they may be able to regenerate protective tissue around damaged nerve fibers, thereby potentially reversing the course of the disease.

If the Lingo treatment succeeds, it could be used in a combination treatment, Michael Panzara, chief medical officer for neurology at Biogen, said in an interview. A patient could be given a drug to stop nerve damage, then take a regenerative medicine to protect nerves, he said.

The treatment options represent a turnaround from a decade ago, when drug makers shied away from multiple sclerosis, considering it a small commercial market and not well understood scientifically, said John Richert, executive vice president of research at the National MS Society, based in New York.

"The stars seem to be aligning correctly," Richert said. "We have one new therapy with very strong effectiveness in Tysabri, and it makes people think we are within a stone's throw of being able to treat this disease much more effectively."

For a potential acquirer, Biogen also presents some risk. The company is not alone in its multiple sclerosis efforts. At least 27 new therapies are being developed by 20 companies, according to a 2006 survey by the Pharmaceutical Research and Manufacturers Association, based in Washington.

Genzyme shares climbed 4 percent on Oct. 15, when the company said its Campath treatment cut the risk of MS relapse by 73 percent compared with a standard drug.

The scientific progress is significant as it follows a treatment disaster in 2005. Biogen and its partner, Elan, lost $18 billion in market value in February 2005 when Tysabri was pulled off the market after two patients developed rare, fatal brain infections.

After patients demanded the drug, saying it was worth the risk, U.S. regulators allowed Tysabri back on the market 15 months later under a restricted-use program.


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