One of the interesting things about the financial markets is how often they appear to be a zero-sum game. That is, most news has two sides, and what's great for one is often terrible for another (and vice versa). Perhaps no recent event highlights this as much as yesterday's withdrawal of Tysabri -- the multiple sclerosis drug jointly marketed by Biogen Idec
The news about two patients developing a serious and essentially untreatable neurological disease, and one having died already, is terrible, and my sympathies go out to them and their loved ones.
There is no question in my mind that Tysabri was on its way to being a blockbuster. The clinical data was so good that the Food and Drug Administration accepted and approved the companies' request for marketing clearance after only one year of a two-year safety and efficacy study. Given its suggested efficacy, Tysabri would likely have brought in at least $2 billion in revenue, and perhaps sales in excess of $4 billion would not have been out of the question.
Nevertheless, while Biogen Idec and Elan were getting pulverized in the markets on this shocking development, the news lifted other companies' stocks. Companies such as Serono, Chiron
Such trade-offs happen a lot. As fellow Fool Karl Thiel pointed out, shares of companies like Neurocrine Biosciences and Sepracor
Such moves are sometimes ridiculous (as in the tango between Taser and pretenders like Stinger or Law Enforcement Associates) and often excessive. Sometimes such trading also appears distasteful -- witness the sharp price movements in "earthquake plays" after the Asian tsunami or the past spikes in airport security stocks when planes crashed. Nevertheless, it's part and parcel of the market's process of digesting information.
In today's case, there is no doubt that Serono, Chiron, and Teva are all getting an important reprieve. While Fool colleague Charly Travers correctly observes that we don't know what is ultimately going to happen with Tysabri, it seems pretty clear that these competitors will have at least six to 12 months of higher sales than they would have normally expected.
Now whether that reprieve is really worth as much as the market thinks it is today, only time will tell. In the meantime, this surprising tale should serve as another reminder to Fools that news is almost never one-sided. So the next time you see a piece of bad news, ask yourself if it might not be pointing the way toward a promising stock that you'd never before considered.
Fool contributor Stephen Simpson, a chartered financial analyst, has no ownership interest in any stocks mentioned.