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Idec Stock Tumbles on News of Earnings Setback

Therapeutics Firm Reports Quarterly Loss

Increases Over 1999

Shares of Idec Pharmaceuticals Corp. stock continued to tumble last week after the San Diego biotech firm announced lower than expected earnings and said it halted studies on a new lupus drug.

On April 24, San Diego-based Idec stock fell 9 percent to $57.38.

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That’s after Idec stock tumbled 18 percent on April 20 closing at $63.13 following the announcement of the disappointing news.

First-quarter net income ended March 31 dropped 33 percent to $3.6 million, or 7 cents a diluted share, from $4.8 million, or 10 cents a diluted share, during the same period last year.

Operating costs climbed to $22.9 million for the first quarter, up from $16.2 million a year ago. The company attributed the hike to expenses related to developing Zevalin, a treatment for non-Hodgkin’s lymphoma.

The company statement followed a series of disappointing reports for Idec.

On April 12 the company said its first-quarter profits would fall about 40 percent short of analysts’ expectations. That same day, Idec stock fell 9 percent.

So far this year, Idec stock is down 38 percent, making it the worst performer in the 15-member Amex Biotechnology Index, according to Bloomberg News.

Idec officials attributed the shortfall in net income to manufacturing costs and expenses related to preparing for the filing of U.S. marketing application for Zevalin.

If approved, Zevalin would mark Idec’s second lymphoma drug on the market.

Idec originally said it would seek approval for Zevalin in the first half of this year, but then postponed the filing to the fourth quarter of this year.

First-quarter sales of the anti-cancer drug Rituxan totaled $78 million, a $26 million increase over the same quarter in 1999.

Idec markets Rituxan with its South San Francisco-based biotech partner Genentech Inc.

Earlier this month, Idec announced that Rituxan sales failed to meet analyst predictions for a third quarter.

Idec also said it halted an 85-patient safety trial of its lupus drug IDEC-131 because results were “not significantly different” from that in the control group taking a placebo drug.

Idec said it plans to initiate another safety trial with IDEC-131 in other disease targets during the second half of the year.

The firm said it will release full results of the already completed Phase II study at a medical meeting later this year.

According to Bloomberg News, the drop in Idec shares was aggravated by recent declines in biotechnology and technology stocks. Analysts say the correction of such stocks last month came after they climbed too fast, too high, the news wire service said.

Indeed, on April 24, the Nasdaq composite index which lists Idec’s stock closed down 161.40 at 3,482.48, the lowest since the devastating sell-off April 14.

John McCamant, executive editor for the Berkeley-based Medical Technology Stock Letter, said he’s not overly concerned the failed trials of its experimental lupus drug will have a long-term negative effect on Idec.

“Not all drugs do work,” McCamant said.

Given Idec’s broad pipeline, good cash position and revenue stream from its lymphoma drug Rituxan on the market, Idec is in a healthy position to continue to develop new drugs, McCamant added.

Idec increased its cash to $265.2 million by March 31 from $246.3 million at the end of 1999.

“Long-term, it’s a positive story,” he said.

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Biotech Losses: Collateral Therapeutics Inc. nearly doubled its net loss to $3.2 million for the first quarter ended March 31 from the same time in the previous year.

A company official attributed the loss to rising research and developmental costs and reduced payments from its German collaborator.

The San Diego-based developer of non-surgical gene therapy products for treating heart disease, reported a net loss of $3.2 million, or 25 cents a share, on April 20.

This compares to $1.8 million, or 17 cents a share, during the same period last year.

First quarter revenues fell to $600,000 from $1.7 million during the same quarter last year as a result of lower payments from its Germany-based partner Schering AG.

Christopher Reinhard, president and chief operating officer at Collateral Therapeutics, warned costs will continue to rise as the firm is preparing to move its lead product GENERX , a treatment for patients suffering from exertional angina related to coronary artery disease , into late-stage clinical trials.

The firm is developing GENERX with partners Schering AG and Berlex Laboratories.

Last month, Collateral reported positive preliminary results for GENERX.

“To the best of our knowledge this marks the first time that a scientifically well-controlled clinical trial of a non-surgical cardiovascular gene therapy has produced positive results and demonstrated a safe and well-tolerated treatment effect,” said Jack W. Reich, chairman and CEO of Collateral.

Webb’s biotech column runs on alternating weeks. Please send items to mwebb@sdbj.com.

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