Thirteen was a good number for Biogen Idec (Nasdaq: BIIB ) and Elan (NYSE: ELN ) .
Twenty-three? Not so much.
That's the number of progressive multifocal leukoencephalopathy (PML) cases that both the European Medicines Agency and the Food and Drug Administration acknowledged have been reported for patients on the companies' multiple sclerosis drug, Tysabri, since it was put back on the market more than two years ago.
The FDA previously said there were 13 cases of the potentially deadly brain infection reported through Sept. 8, so it seems there have been 10 new cases reported since then. Seven weeks doesn't make a trend, but it's still startling nonetheless.
The true rate of PML is very important for the sales of Tysabri. The drug works better than other multiple sclerosis drugs such as Teva Pharmaceutical's (Nasdaq: TEVA ) Copaxone, Novartis' (NYSE: NVS ) Extavia, and Rebif from Pfizer (NYSE: PFE ) and EMD Serono. But patients are only going to use it if the risk of PML is low enough to justify the added benefit.
The European agency has "started a review of the benefits and risks of Tysabri." That might result in tighter prescribing information, but I doubt it'll result in Tysabri being pulled from the market.
Stricter prescribing information might not be the worst thing. Of the first 11 cases -- before Biogen stopped reporting individual cases -- eight were from outside the U.S. even though there were more patients on Tysabri in the U.S. than elsewhere. That may mean that the Touch program in the U.S., which regulates who gets the drug, may be working. If stricter prescriptions result in a lower PML rate, that's good long-term news for Biogen and Elan, even if it means some impact on sales in the near term.
After Friday's beatdown, are the two companies good values? It's hard to know because it's difficult to predict how patients and doctors are going to react to the news. Investors might be better off sitting on the sidelines, at least long enough to see how the prescriptions hold up before jumping in.
Are Elan and Biogen values or value traps at these levels? Let us know in the comments section below.