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Stock Analyst Update

Biogen Is on the Mend

Biotech firm's latest addition to its product pipeline is good news.


The latest round of news from Biogen (BGEN) provides evidence that the company is on the right track. The stock still holds some risk, but with comparatively low valuations, Biogen has become a more interesting choice.

The biotech firm announced Thursday that it will collaborate with the Irish pharmaceutical company Elan (ELN) on the development and marketing of Elan's multiple sclerosis drug, Antegren. The MS therapy is currently in Phase II trials, and if approved, could be on the market in 2004.

The addition of Antegren would be a natural fit for Biogen. The company already markets Avonex, the leading treatment for MS in the United States. Biogen has strong ties to the neurology community, which would give the company a distinct advantage in marketing Antegren. Moreover, because Antegren operates in a different manner than Avonex, it is possible that the two drugs could be used in a complementary fashion.

Of course, the picture isn't perfect. Last year, Elan halted testing of Antegren for MS flare-ups when the drug failed to show efficacy. (Now the drug is being tested as a long-term treatment for the neurological disease.) Moreover, because Antegren probably won't reach the market until 2004 at the earliest, Biogen is still resting all of its near-term hopes on the psoriasis drug Amevive. If Amevive fails to win FDA approval, Biogen's stock could be hit hard.

Still, at about 12 times sales, Biogen is the cheapest of the big biotechnology companies these days, making it attractive from a valuation standpoint. The stock still holds some downside risk, but for biotech bargain-hunters, its improved pipeline makes it an increasingly appealing option.

Emily Hall does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.