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NEW YORK, Feb 28 (Reuters) - Biogen Idec and Elan Corp. Plc on Monday suspended sales of their much-heralded new multiple sclerosis drug Tysabri after a patient died from a rare and often fatal infection of the central nervous system.
The shares of both companies plummeted, for a combined loss in market value of more than $17 billion as of the close.
The drug, approved in the United States last November, was widely expected to become the world's leading treatment for multiple sclerosis and an important driver of growth for both Biogen Idec and Elan.
The companies based their decision on one confirmed, fatal case and one suspected case of progressive multifocal leukoencephalopathy (PML), a rare infection of the brain and spinal cord.
The news comes at a time of heightened public and regulatory awareness of drug safety following the withdrawal of Merck & Co. Inc.'s painkiller Vioxx and concern that some newer antidepressants may heighten the risk of suicide in young people.
"If the drug comes back it will have a huge safety cloud over it and will require a set of investigations of all patients pre-and post marketing approval," said Geoff Porges, an analyst with Bernstein & Co.
The companies said the confirmed or suspected PML cases occurred in patients who had been taking Tysabri in combination with Biogen Idec's existing multiple sclerosis drug Avonex for two or more years. There was no evidence of the condition in patients taking Tysabri alone.
The companies, which have also stopped clinical trials of the drug for rheumatoid arthritis and Crohn's disease, said they will be re-examining the brain scans from all patients in previous clinical trials to learn more about what connection, if any, may exist between Tysabri and the development of PML.
Jim Mullen, chief executive of Biogen Idec, told investors and reporters on a conference call that it would not take the companies "a long time" to re-evaluate the clinical trials. But he said "it may take some time to figure out a path forward" for the drug.
Elan said on a conference call it does not believe it is the intention of the U.S. Food and Drug Administration to have the drug removed from the market and that if no more cases of PML are found Elan would hope to have Tysabri back on sale by the third quarter of 2005.
"I think it's very plausible that in the absence of anything new that we may find that this product would easily be back on the market by the fall," said Kelly Martin, Elan's chief executive.
Tysabri is the first in a new class of multiple sclerosis drugs called selective adhesion molecule, or SAM, inhibitors. It is a humanized monoclonal antibody that blocks a molecule known as alpha-4 integrin and prevents inflammatory cells from escaping into the tissue of the brain.
The drug was approved based on clinical trials that showed it to be 66 percent more effective in reducing the relapse rate of multiple sclerosis patients than those taking a placebo and more effective than the typical rates of between 30 and 40 percent seen in existing therapies.
Multiple sclerosis is an autoimmune disorder that affects more than 1 million people worldwide and can cause blurred vision, weakness, poor muscle coordination, loss of memory and mental function.
The drug was expected to generate sales of more than $1 billion, helping Elan recover from a host of problems, including a regulatory investigation and brush with bankruptcy in 2002, and giving Biogen Idec a new growth engine as its flagship product Avonex reaches maturity and faces increased competition. "The largest blow is, of course, for Elan, as they came back sharply on Tysabri after all the setbacks in recent years," said Bob Pooler, an analyst at Swiss brokerage Lombard Odier Darier Hentsch.
Biogen Idec shares tumbled nearly 43 percent to close at $38.65 on Nasdaq and dragged the American Stock Exchange biotechnology index down about 5.5 percent.
"Without Tysabri, I think Biogen is handicapped as far as the long-term growth they had been expecting," said Sena Lund, an analyst at Cathay Financial.
Elan's shares fell 70 percent to close at $8.00 on the New York Stock Exchange. The shares also fell nearly 70 percent to 6.5 euros in Ireland, wiping about 3 percent off the value of the Irish stock market . The company said it is likely to make adjustments to its 2005 forecasts within the next 10 days.
Shares of the Swiss biotechnology company Serono SA , whose Rebif drug had been threatened by Tysabri, rose 19 percent, while Germany's Schering AG , which makes another rival product, rose about 3 percent.
Shares of Teva Pharmaceutical Industries Ltd. , which markets the multiple sclerosis drug Copaxone, rose more than 9 percent to close at $30.11 on the Nasdaq.
