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Idec Stock Recovers Slightly After Analyst’s Downgrade

Idec Stock Recovers Slightly After Analyst’s Downgrade

Biotech: Lymphoma Drug’s Near-Term Growth Potential Is Uncertain

BY MARION WEBB

Senior Staff Writer

Shares of Idec Pharmaceuticals Corp. recovered slightly before the Thanksgiving break from a 9 percent drop after a Merrill Lynch analyst downgraded the stock from “buy” to “neutral.”

On Nov. 26, Idec stock dipped as low as $32.04, then closed at $32.84.

The next day, the stock closed at $33.14, a far cry from its 52-week high of $73.32.

“Although we remain convinced that Zevalin will be a successful product in several years, the near-term growth potential is less certain as physician adoption remains slow despite recently receiving Medicare reimbursement codes,” said Merrill Lynch analyst Dr. Eric Ende in his research report.

Ende gave a reduced estimate for Zevalin sales to $59 million for 2003 from previously $79 million. He also revised expected 2004 Zevalin sales to $104 million from $140 million.

As a result, Ende slashed his earnings-per-share estimate for Idec to $1.07 from $1.14 in 2003 and to $1.35 from $1.47 in 2004.

“Zevalin is a complicated drug,” said John McCamant, editor of the Medical Technology Stock Letter in Berkeley.

Zevalin was approved for patients who failed to respond to Idec’s first-generation non-Hodgkin’s lymphoma drug, Rituxan.

Several specialists, including an oncologist and nuclear physicist, are needed to monitor the multiple steps involved in giving Zevalin to non-Hodgkin’s lymphoma patients.

Ende lists three reasons why Zevalin use is slower than expected: Logistical issues make using the product cumbersome. Doctors aren’t sure which patients are likely to benefit from Zevalin and worry its use may limit future treatment options.

At the same time, with Rituxan sales growth slowing and uncertainty over the drug’s usefulness for other diseases, Idec’s stock price has become increasingly dependent on Zevalin sales, Ende wrote.

“The most recent physician survey performed quarterly by Idec’s marketing group suggested no statistical change in the market penetration,” Ende wrote. “However, we continue to see increased usage as maintenance therapy and in re-treatment as drivers for future growth.”

Ende expects Rituxan sales will grow starting 2005. The boost will come from the drug being used as a maintenance therapy and for treating rheumatoid arthritis patients, which is currently being evaluated in clinical trials.

Idec shares Rituxan sales with partner Genentech Inc. of South San Francisco.

It owns, however, all product rights for Zevalin in the United States.

McCamant remains skeptical, saying Idec’s reliance on one product, Zevalin, is too strong.

There are also concerns regarding competition.

Corixa Corp. in Seattle developed a drug similar to Zevalin called Bexxar, which is up for Food and Drug Administration advisory panel review. If Corixa demonstrates that Bexxar addresses medical needs that aren’t met by products already on the market, including Zevalin, the drug “could present a legitimate threat of competition,” McCamant said.

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