Shareholder lawsuits target makers of MS drug

/ Source: The Associated Press

Biogen Idec Inc. and Elan Corp. face a handful of shareholder lawsuits after withdrawing their multiple sclerosis drug from the market, a move that led the stock prices of the U.S. and Irish drug-making partners to plunge.

The lawsuits allege the companies artificially inflated the values of their stocks before last week's withdrawal of the recently approved medication Tysabri by concealing problems indicating the drug could leave patients vulnerable to a rare central nervous system disease.

At least five lawsuits seeking class-action status on behalf of shareholders have been filed in federal court in Boston against Cambridge-based Biogen Idec since last week. Two others have been filed in Massachusetts against Dublin-based Elan.

The companies say they learned of patient illnesses Feb. 18 and quickly informed federal regulators amid a rapid investigation leading to the Feb. 28 announcement that they were withdrawing the drug from the market.

"Biogen Idec believes there is no merit to these lawsuits," spokesman Jose Juves said. "The action taken on Feb. 28 was made exclusively out of concern for patient safety."

Biogen Idec and Elan shares tanked on news of the drug's withdrawal. Biogen shares fell $28.63, or nearly 43 percent, to close at $38.65 the day of the announcement. Elan shares dropped $18.90, or more than 70 percent, to close at $8. The declines wiped out $17.8 billion in shareholder equity in a single day for the biotechnology partners.

The lawsuits allege violations of federal securities laws, accusing the companies of misleading investors and failing to disclose problems indicating Tysabri could compromise the immune system and leave patients vulnerable to the rare and frequently fatal disease progressive multifocal leukoencephalopathy.

One patient died of the condition and another contracted it but has survived.

Both patients were taking Tysabri in combination with another Biogen Idec treatment for MS, called Avonex, in clinical trials.

The lawsuits allege the companies disregarded evidence of problems to win approval for Tysabri Nov. 23 under the Food and Drug Administration's "fast-track" program for drugs that address an unmet medical need.

The complaints seek to represent investors who held shares in the companies from Feb. 18 to Feb. 25, the final trading day before the drug was withdrawn.

The lawsuits do not focus on millions of dollars in stock trades by Biogen insiders in the days before the company says it first learned of the potential for problems with the drug.

Tysabri had been widely forecast to reach $1.5 billion in annual sales by 2007 and see further growth in subsequent years. Biogen and Elan officials say they still hope Tysabri eventually can return to the market if it can be proven safe.