Glaxo pact helps Human Genome; Mylan, Impax up with Teva, Ivax; Elan, Biogen up on Tysabri plans

By Ronda Fears

Nashville, July 26 - Elan Corp. plc and Biogen Idec Inc. both ended higher Tuesday on comments from Biogen executives in the company's earnings conference call to the effect that efforts would be redoubled to return their collaborative multiple sclerosis drug Tysabri to the market.

Biogen Idec Inc. reported second-quarter net income of $34.5 million, or 10 cents a share, compared with $827,000, or breakeven, a year ago. Revenues rose 12% to $606 million from $539 million. That was after a $20 million write-off for Tysabri inventory.

Revenues from Avonex, Biogen's other MS drug, and the oncology drug Rituxan, which is marketed by Genentech, made up for the losses from Tysabri being pulled from the market. Elan and Biogen voluntarily withdrew Tysabri from the market in February after a patient in trials developed a fatal brain condition; since then, four others have been diagnosed with the condition.

But Biogen Idec chief executive James Mullen said efforts to return Tysabri to the market are on track, with additional evaluations scheduled to be completed by the end of the summer, followed by discussion with regulatory authorities regarding the drug's fate.

Biogen shares gained 32 cents on the day, or 0.83%, to close at $38.82, but the stock was seen in after-hours trading off by 23 cents, or 0.59%.

Elan is slated to report earnings Thursday. The Irish drugmaker's shares closed Tuesday up 9 cent, or 1.15%, at $7.94, and the stock was higher by another 13 cents, or 1.64%, in after-hours trade. A sellside convertible trader mentioned Tuesday, too, that the Elan 6.5% convertible due 2008 traded up a point.

ImmunoGen up on Genentech pact

ImmunoGen bounced nicely Tuesday after it announced a third licensing agreement with Genentech to use its proprietary technology to develop therapeutic antibody products for cancer treatments. It was its third such arrangement with Genentech, entitling it to milestone payments and future royalties on any successful products developed with its technology.

The license provides Genentech with exclusive rights to use ImmunoGen's Tumor-Activated Prodrug technology with therapeutic antibodies to an undisclosed target. Under the deal, ImmunoGen will receive a $1 million license payment, milestone payments and royalties on the sales of any resulting products. Genentech is responsible for developing, manufacturing and marketing of any products resulting from the license.

ImmunoGen shares rose 62 cents on the day, or 9.38%, to $7.23.

Glaxo deal boosts Human Genome

Human Genome Sciences Inc. narrowed its second-quarter net loss and posted sharply higher revenue, which was directly attributed to getting a milestone payment from GlaxoSmithKline plc as part of the licensing agreement for its diabetes drug Albugon.

Glaxo acquired exclusive rights to develop and sell Albugon in 2004, and Human Genome estimates milestone payments from the agreement could be worth as much as $183 million.

In addition, earlier this month, Glaxo agreed to co-develop LymphoStat-B, a drug being tested for treatment of rheumatoid arthritis and lupus, with Human Genome. The two companies will split costs for clinical trials and development and split any profits from sales of a drug that makes it to market. Human Genome expects to complete phase II clinical trials of LymphoStat-B in patients with lupus this year.

Rockville, Md.-based Human Genome reported a second-quarter net loss of $56.0 million, down from $58.5 million in the same quarter a year ago. Revenue was $2.9 million, compared with $600,000 a year earlier.

Human Genome shares rose 73 cents, or 5.16%, to $14.88 and the sellside convertible trader said its 2.25% convertible due 2011 traded up 3.5 points to 113 bid, 113.5 offered on the stock move.

Millennium up on Schering pact

Millennium Pharmaceuticals Inc. continued to rise Tuesday, a day after announcing a big licensing pact with Schering-Plough Corp., which prompted several upgrades to the stock.

On Monday, Millennium sold the U.S. licensing of its Integrilin to Schering Plough Corp. for an upfront payment of $35.5 million plus future royalty payments of $85 million in 2006 and 2007, in addition to a $45 million to $50 million payment for current inventory.

It was seen as a sweet deal for Millennium by analysts, several of whom cited current lackluster growth in Integrilin sales, lack of visibility regarding future Integrilin growth and the economics of this transaction, which is expected to be at least at par with the current 50/50 profit split between the companies.

Millennium said that following the close of the Schering-Plough transaction its combined research and sales expenses will drop by about 15%, reflecting the loss of about 200 jobs. Yet, the Cambridge, Mass.-based biotech firm said it still expects a 2005 loss, excluding items, of slightly under $100 million.

On Tuesday, Millennium shares gained 85 cents, or 8.64%, to $10.69.

ImClone's Erbitux disappoints

The market was less pleased with ImClone Systems Inc.'s earnings report and, more specifically, the numbers for its colon cancer drug Erbitux as biotech heavyweight Amgen Inc. is in the wings with a competing cancer drug.

ImClone reported second-quarter net income of $26 million, or 30 cents a share, up from $24 million, or 29 cents a share, a year ago. Revenue rose to $92.4 million, but Wall Street analysts were expecting $95.8 million. U.S. sales of Erbitux were up 37% to $98 million, but analysts were looking for $100 million. ImClone receives 39% of U.S. Erbitux revenue as part of a marketing deal with Bristol-Myers Squibb Co.

ImClone is seeking broader regulatory approval of Erbitux, expanding its use for colon cancer to other cancers, specifically head and neck cancer and perhaps later to include lung cancer as well as pancreatic cancer.

On the results, ImClone shares fell 85 cents, or 2.42%, to $34.23, and the company's 1.375% convertible bonds due 2025 were said to be off 0.25 point on swap, trading down to 82.5 bid, 83 offered.

Generics gyrate on Teva/Ivax

Teva Pharmaceutical Industries Ltd.'s $7.4 billion acquisition of Ivax Corp. continued to stir generic drug names on speculation of further consolidation in the group.

Mylan Laboratories Inc., Watson Pharmaceuticals Inc. and Impax Laboratories Inc. were both higher Tuesday while Forest Laboratories Inc. and several others were lower.

"Everyone is trying to make the right guess on this and I don't think anyone will do it, not based on the Teva/Ivax deal," said a buyside analyst. "Some will be right; some will be wrong. We're just holding tight with what we have, because we made whatever decision a while back, we're just sticking to our plan."

For the Big Pharma names like Pfizer Inc., Schering-Plough Corp. and Eli Lilly & Co., Deutsche Bank Securities analysts Barbara Ryan and Ross Muken said in a report Tuesday that the allergy market is one of the biggest product areas pressured by generics and over-the-counter products.

But even among generic drug companies the competition is intense.

Smith Barney Citigroup analyst Andrew Swanson said in a report that Ivax itself, aside from its potential first-to-file exclusivity opportunities, stands to face a decline in sales in its existing U.S. generic portfolio by 4% annually because of rising competition.

Teva and Ivax were both higher again Tuesday. Teva shares rose 72 cents, or 2.31%, to $31.95 and Ivax stock gained 33 cents, or 1.31%, to $25.50.

Mylan pains externally driven

Mylan is considered as one of the most likely generic drug companies to be on the hunt. But with recent financing activities analysts said there is little room for a slip.

On Tuesday, Mylan shares added 22 cents, or 1.25%, to close at $17.88.

GimmeCredit analyst Evan Mann said in a report that, with the King Pharmaceuticals Inc. transaction scuttled in February and Carl Icahn no longer a distraction, "Mylan can focus on building its generic drug business." But, he added, "There is little room for disappointment."

Last month, Mylan Labs made a $1 billion stock buyback funded with new debt, doubled the common stock dividend, and raised its fiscal 2006 earnings forecast in an effort to fend off a $5.4 billion bid for the company by Icahn.

After the FDA announced it was investigating reports of 120 deaths in patients using pain-relief patches containing fentanyl, which are similar to Mylan's recently launched generic version, Icahn was all too happy to tender his shares, reducing his stake from 9.9% to less than 1%.

Mann said that despite price erosion from competition in the generic drug business, Mylan's EBITDA margin should benefit from increased cost-cutting measures, its introduction of new products, and the promise of nebivolol - Mylan's blood pressure drug, which it is seeking a licensing agreement for by year-end. Again, he said there is little room for execution error ion Mylan's business plan.

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