Date: Jul 06, 1994 Author: MILT FREUDENHEIM Source: New York Times (
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Biogen Inc., one of the few biotechnology companies that make money, should know by the end of the summer whether it is ready to grow into an operational drug manufacturer, with substantially larger earnings.
The company, based in Cambridge, Mass., already earns royalties on drugs and vaccines, which it developed and licensed to large pharmaceutical companies including Schering-Plough, Merck and SmithKline Beecham.
Biogen made $32 million in net income last year on revenue of $149 million. The other big money spinners in biotechnology are Amgen and Genentech, both important manufacturers already, and two budding drug makers: Chiron and Genzyme.
Biogen is racing to seek Federal approval for two promising products: beta interferon, a genetically engineered treatment to ease the devastating effects of multiple sclerosis, and Hirulog, a synthetic peptide intended to reduce dangerous clotting after balloon procedures that open blocked arteries. Important Months Ahead
It will have the results of advanced tests of beta interferon in the next 90 days, based on testing completed in February, James L. Vincent, Biogen's chairman, said. The company intends to finish testing Hirulog in the fourth quarter.
Wall Street analysts said 1994 should be the most important year in Biogen's 16-year history. Its shares closed at $27.875 yesterday, down 37.5 cents, in Nasdaq trading, and far below the 12-month high of $52.75 on Jan. 31.
Even if approval of the new products is delayed, Biogen will still be profitable, said Wole M. Fayemi, a biotechnology securities analyst with Hambrecht & Quist. But if the test results are weak, he said, "the stock will effectively be dead."
Biogen stock has fallen in price recently on reports that profit may decline this year because of a possible drop in royalty revenue as well as higher costs. In April, Japan, which is an important market, ordered a 17 percent price cut for alpha interferon, a widely used treatment for hepatitis B and C. Alpha interferon is made by Schering-Plough under license from Biogen.
Mr. Vincent said Schering-Plough had assured Biogen that it could make up for the Japanese price cut by aggressively increasing the volume of worldwide sales of its alpha interferon product, Intran A.
Biogen hopes to apply early next year for Food and Drug Administration approval of beta interferon, and analysts said the F.D.A. would probably move quickly. It recently approved a related multiple sclerosis drug, Betaseron, made by Chiron.
Neither product is a cure for multiple sclerosis, but the demand is intense for any drug that eases the intermittent onslaughts of the disease, which attacks the protective sheath around nerve and brain cells, hitting particularly hard at women in their 30's. Analysts said Chiron was having trouble keeping up with orders.
Biogen hopes that its tests will show that weekly injections of its drug result in fewer attacks and eventually delay the effects of the disease, which is ultimately paralyzing for about 20 percent of patients.
Teva Pharmaceutical Industries, an Israeli-American company, is also testing a multiple sclerosis drug, COP-1, a chemically different approach. Analysts say COP-1 may be submitted to the F.D.A. in January.
Even in a three-way battle, the products are expected to be lucrative. David Saks, an analyst with Gruntal & Company, projects a $1 billion global market serving an estimated 500,000 patients in North America and Europe, Teena L. Lerner at Lehman Brothers said the three products would probably have different side effects. "It's not a competition that someone would win hands down," she said.
As for Hirulog, Biogen hopes that its drug will be a swifter, more effective alternative to heparin, a widely used anti-clotting drug made by Abbott Laboratories. It expects to seek F.D.A. approval for Hirulog in 1995.
Mr. Vincent said speedy action to prevent clotting was vital for angioplasty patients whose arteries close after a balloon procedure. One in eight of these patients, he said, requires a repeat procedure immediately, or bypass surgery.
Preparing for F.D.A. approvals, which could come in 1996, Biogen is strengthening its management. It recently hired James R. Tobin, president of Baxter International, the big hospital-supply company, to be its president.
Mr. Vincent, the chairman, had been a senior executive of Allied Signal and of Abbott. He succeeded Walter Gilbert, a Harvard professor and Biogen founder who received a Nobel Prize in chemistry in 1980 for his work on alpha interferon.
Graph: "Turning a Biotech Profit" shows the top five biotechnology companies tracked by Paine and Webber that made a proft in 1993. (Source: Paine Webber, Bloomberg Financial Markets)
