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Biotech — Idec’s Faith in Cancer Drug Bolstered By Stock Surge

Biotech: Sales Outlook Positive, But Competition Continues

Shares of Idec Pharmaceuticals Corp. started rising in May amid whispers that second-quarter sales of the firm’s cancer drug Rituxan would exceed Wall Street’s expectations, said a biotech analyst.

Idec stock rose steadily from the $60 range in May into the $100 range in July.

Last week, the San Diego-based biotechnology firm made good on the forecast.

Idec said second-quarter net income was $13.3 million, or 26 cents a share, on revenues of $37.4 million.

That compares to $19.9 million, or 40 cents, a share on revenues of $35.3 million during the same quarter ended June 30 last year.

Wall Street’s consensus was Idec would earn 18 cents a share, said Robert Toth, a financial analyst at Vector Securities International in San Francisco.

Toth had predicted 14 cents a share, adding a couple of non-recurring licensing fees helped Idec beat initial forecasts.

He argreed with company officials that second-quarter results re-established Rituxan, a treatment for non-Hodgkin’s lymphoma, as a major cancer drug.

“The last three quarters have been difficult to determine if demand was growing or if inventory build-up caused the sales growth,” Toth said. He tracked Idec’s inventory and found Rituxan’s 41 percent sales growth reflected true demand.

Toth has high hopes for Idec.

“Rituxan will be a $1 billion drug,” Toth said, adding, “All market dynamics for the usage are positive.”

Toth anticipates total Rituxan sales of $387 million for 2000; $503 million for 2001 and $624 million for 2002.

Other analysts are less optimistic.

Tom Dietz, an analyst for Pacific Growth Equities in San Francisco, said while the upside is good, it has its limits.

He predicts Rituxan sales will grow between 30 and 40 percent over the next couple of years, but no more.

Toth, however, seemed optimistic of Idec’s potential to get Food and Drug Administration approval for a second non-Hodgkin’s lymphoma drug next summer.

Idec reiterated on July 18 it will seek approval with the FDA for Zevalin by the fourth quarter.

Dietz, however, conceded that a patent owned by another biotechnology firm, San Francisco-based Coulter Pharmaceutical Inc., may keep Zevalin out of the marketplace.

Coulter developed a similar unique treatment for non-Hodgkin’s lymphoma for which it sought FDA approval last August.

The FDA has since asked Coulter to modify its application, which Coulter has yet to resubmit, according to analysts.

Dietz said even though Coulter suffered a setback, it didn’t give Idec enough of an opportunity to close the gap.

He said regulators will scrutinize Zevalin as highly as Coulter’s drug Bexxar, which has produced encouraging results in clinical trials.

“Bexxar has outstanding data in salvaged patients and better data in earlier-stage patients with a response rate of 100 percent,” he said.

He agreed with other analysts that it’s hard to compare Bexxar and Zevalin, because the firms’ findings looked at different patients, and used different definitions and criteria.

Zevalin, a unique treatment that combines an antibody with a radioactive particle to kill a tumor, but leaves the healthy cells intact, has also shown promising results in patients who failed all other therapies.

Toth said even though Zevalin is more toxic than Rituxan because of its attached radioisotope, more patients responded to the drug in comparative testing.

In an Idec study comprising 90 patients, 80 percent of the patients treated with Zevalin showed improvement vs. 44 percent treated with Rituxan alone, he said.

“I think it’s safe to say that Zevalin could capture one-third or one-half of the market , that would be a $150 million drug conservatively speaking,” Toth said.

The market for patients who failed Rituxan is about $250 and $300 million, he said.

Shares of Idec closed at $124.25 on July 18, the day the company reported final second-quarter earnings and sales.

AMS to Be Posted on Russell 3000 Index

Advanced Marketing Services, Inc., a San Diego-based book industry service company, is about to get some added exposure.

Advanced Marketing announced it had been added to 12 of the 21 performance indexes compiled by the Frank Russell Co. of Tacoma, Wash.

For instance, the Russell 3000 Index measures the performance of the 3,000 largest U.S. companies.

“We are very pleased with our inclusion in the Russell indexes,” said Mike Nicita, president and CEO.

He thinks the broader exposure to the institutional market will better the company, Nicita said.


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