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Biogen shares fall on JP Morgan downgrade

Shares of Biogen Idec Inc. fell Monday after JP Morgan cut its rating on the stock, saying the multiple sclerosis drug Tysabri could continue facing challenges in 2009 while the company lacks any catalysts to drive new revenue.
/ Source: The Associated Press

Shares of Biogen Idec Inc. fell Monday after JP Morgan cut its rating on the stock, saying the multiple sclerosis drug Tysabri could continue facing challenges in 2009 while the company lacks any catalysts to drive new revenue.

Shares fell $1.05, or 2.2 percent, to close at $47.44 after Geoffrey Meacham cut his rating to "Neutral" from "Overweight" and reduced the price target to $50 from $55.

Biogen's stock has traded between $37.21 and $73.59 over the past 52 weeks.

Meacham doesn't expect the number of patients taking Tysabri to increase in the near term. The drug was beset by a series of negative announcements in 2008. In all, the company reported four cases of a deadly brain infection in patients taking the drug. The company and its partner Elan Corp. have argued the risks, which are on the drug's label, are outweighed by the benefit the drug provides to multiple sclerosis patients.

Tysabri was pulled from the market in 2005 after being linked to progressive multifocal leukoencephalopathy, or PML, but reintroduced under restricted sales conditions in mid-2006. More than 35,500 patients are taking the drug worldwide.

While Meacham remains optimistic for Tysabri's long-term outlook, he said the drug is the sentiment driver for Biogen shares and negative sentiment remains a near-term weight. Meanwhile, he said there are no other significant drivers expected soon.

"Near-term initiation of a one-year, phase 3 study of long-acting Avonex should be a positive for sentiment," he said, adding it could boost shares. "That said, data are not likely to come until mid-2011 at the earliest, and in this market we don't think the Street will patiently wait for the data."

Avonex is Biogen's other multiple sclerosis drug.

Looking ahead, though, Meacham said it is hard to determine how the stock would react in the near term.

"An accelerated share repurchase, a smart and leverageable acquisition, or a potential Biogen takeout all would be obvious positives that could prove our 'Neutral' thesis wrong," he said.