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Biogen Preserves MS Drug's Sales With Label Change


With a blood test to assess risk for patients taking Tysabri, CEO George Scangos buys some time as his company hopes to turn an experimental pill into a blockbuster.

For Biogen Idec (BIIB) investors, the key to future growth lies in the prospects for an experimental multiple sclerosis drug known as BG-12.

The oral treatment would compete with Novartis' (NVS) MS pill Gilenya, which has a head start but faces some safety concerns just voiced last week out of Europe. A Gilenya safety scare would be a positive for Biogen as it prepares to file for US approval of its drug BG-12 in the first half of this year. Gilenya is already on its way to becoming a blockbuster drug and analysts have high hopes for Biogen's BG-12 as well.

But investors have something else to cheer -- the comeback of an older drug, Tysabri, which has faced serious questions about its own safety profile. The US Food and Drug Administration just approved a new label for Biogen and marketing partner Elan (ELN) that allows the companies to note a blood test will screen for the likelihood of a rare and fatal brain disease linked to Tysabri. Using this test, doctors can identify patients at risk for contracting the disease known as progressive multifocal leukoencephalopathy, or PML. The test is made by Quest Diagnostics (DGX).

The label should help mitigate a problem for Biogen in the short term. Multiple sclerosis is a critical focus for the company. Tysabri and another MS drug, Avonex, make up more than two thirds of Biogen's sales. While BG-12 represents the future growth for the company, the addition of a screening test is a best outcome for Tysabri, which was recalled at one point. The drug's label carries strong safety warnings.

Certainly there's no guarantee BG-12 will be approved by the FDA on its first try -- or at all. But investors seem to be betting on it.

Shares of Biogen are up more than 70% in the past 12 months. The stock fell 2% to $115.96 in midday trading Monday.

Can Biogen's shares climb higher? RBC Capital Markets analyst Michael Yee thinks so. He recommends buying the stock and predicts the shares can reach $135 in the next year.

"We think BG-12 can become a blockbuster leading oral therapy and Tysabri could experience less-than-expected share loss and should grow market share" as doctors use blood tests to assess patient risk, Yee says.

BG-12 may eventually reach $3 billion in annual sales, the analyst predicts. He assigns $19 of his stock price target to that one experimental drug.

"Tysabri has benefited thousands of patients worldwide who are living with multiple sclerosis," Biogen CEO George Scangos said in a statement announcing the drug's label change.

The label is a win for Scangos and Biogen but ultimately he'll be judged on the success of BG-12.

Twitter: @brettchase

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