Biogen Idec says it's rebounding strongly

The suspension of the multiple sclerosis drug Tysabri on Feb. 28, 2005, was the start of a difficult year for Biogen Idec Inc. of Cambridge.

When the company pulled the groundbreaking treatment off the market because of potentially deadly side effects, it set in motion a retrenchment that continued for months.

The company laid off 640 workers, sold a plant in California that was to have manufactured Tysabri, and decided to sell off another drug, Amevive -- an acknowledgement that the also-ran psoriasis treatment had not met expectations. (It still hasn't attracted a buyer.)

But after a scientific committee last week unanimously recommended to the Food and Drug Administration that Tysabri be brought back to the market, Biogen Idec can now point to a string of successes. Earlier this month, the FDA approved the company's Rituxan, a cancer drug, as a treatment for rheumatoid arthritis. A final FDA decision on Tysabri is expected later this month.

Along with last year's difficult moves, the developments have left Biogen Idec in a strong position, said company executives.

''With Rituxan being approved in rheumatoid arthritis and Tysabri getting close to moving forward in multiple sclerosis, it puts momentum into the Biogen Idec name," said Peter N. Kellogg, the company's chief financial officer.

''Last year, we had to get our cost structure recalibrated to respond to the fact that Tysabri had been suspended," Kellogg said. ''We had to scale back our infrastructure. That was tough, because we're a company that's always been growing."

The layoffs reduced Biogen Idec's headcount from 4,000 to about 3,400, with about 1,400 of those employees in Cambridge.

Now, the company is hiring as many as 90 people to sell Rituxan in the rheumatoid arthritis market. Genetech Inc., the California company that shares marketing rights and revenues from Rituxan, is hiring its own sales force.

Once the FDA approves the sale of Tysabri -- which is expected -- Biogen Idec will expand its call center in North Carolina. That hiring will continue as Tysabri sales increase, Kellogg said.

But the potential for Tysabri sales is unknown. After suspending sales last year, Biogen Idec and Elan Corp., its Irish partner, found that three patients using Tysabri in clinical trials had contracted a rare brain disease. Two of them died. Questions still remain about the risks associated with the drug, how to monitor patients for the rare disease, and whether the incidence of it will increase with longer periods of treatment.

In the three months it was on sale, Tysabri was quickly adopted by doctors and patients. The drug is about twice as effective in preventing debilitating relapses of multiple sclerosis, in which a patient's symptoms suddenly flare up. It is administered in a once-a-month intravenous infusion, compared to more frequent injections for Avonex, Biogen Idec's existing MS drug, and Rebif, a treatment sold by Serono SA.

If Tysabri is approved for front-line treatment -- meaning it can be the initial course of therapy, not a treatment reserved for patients who aren't responding to other MS drugs -- it will have enormous sales potential. But that could also cut into sales of Avonex, which contributed more than $1 billion in revenue to Biogen Idec last year.

''Tysabri appears to have a number of advantages over Avonex," said Elemer Piros, an analyst with Rodman & Renshaw. ''That could be a real problem for Biogen Idec."

Kellogg's take: Avonex is the market leader in existing treatments, with about 35 percent of the worldwide MS market. If Tysabri returns as a front-line treatment, it would take market share away from all of Biogen Idec's competitors, as well as from Avonex. In addition, Tysabri was priced higher than alternative treatment when it was on sale, and seems likely to return with a premium.

''A new product that has better efficacy warrants higher pricing in the market," Kellogg said. ''We really don't think cannibalization of Avonex will be a problem."

Geoffrey Meacham, an analyst at JPMorgan, said his firm had an ''overweight" rating on Biogen Idec long before last week's committee meeting. The question is whether the likelihood of Tysabri's returning is already priced into Biogen Idec's shares. The company's shares, which didn't trade during the two-day hearing, jumped when they went on sale Thursday, and gained another 47 cents, or 0.5 percent, to close at $47.78 Friday.

''I expect the tone to change to modestly positive on Biogen Idec," Meacham said. ''I suspect it's not fully priced in, so there's some room to go in the stock. But we're approaching a scenario where the good news is fully priced in."

Jeffrey Krasner can be reached at krasner@globe.com.