A Potential Blockbuster Bites the Dust. Should You Worry?

Despite the gloomy headlines, investors shouldn't be upset that Roche (OTC BB: RHHBY.PK) and Biogen Idec (Nasdaq: BIIB) have decided to end development of ocrelizumab for rheumatoid arthritis.

Sure, ocrelizumab had the potential to be a multibillion-dollar drug. Just look at the sales of the current top-selling anti-inflammatory drugs.

Source: company press releases.

But the big shock would have been if the companies had kept the program going. In March, they stopped clinical trials testing ocrelizumab in rheumatoid arthritis patients because of opportunistic infections in patients taking the drug.

Ocrelizumab works by taming the immune system, which has gone a bit into overdrive in rheumatoid arthritis patients. Unfortunately it looks like ocrelizumab is suppressing the immune system a little too much and keeping it from doing its real job of fighting off infections.

Roche and Biogen are continuing a phase 2 trial testing ocrelizumab in multiple sclerosis patients. That's probably not a complete waste of money. Given the relative severity of that disease, multiple sclerosis drugs can have worse side effect profiles than rheumatoid arthritis drugs.

But I wouldn't go penciling in revenue for the drug, either; ocrelizumab needs to have outstanding efficacy to justify an increase in infections (assuming they're seen in multiple sclerosis patients as well).

The loss of ocrelizumab from company pipelines is a bigger blow to Biogen than it is to Roche, but the biggest blow came to investors who trade the news, reading nothing more than the headlines. Dig a little deeper Fools; you might just find that the bad news is actually old news.