Biogen Idec and Elan have decided to withdraw their drug Tysabri because a patient died after the treatment that used Biogen’s drug in combination with Avonex (Elan’s drug), and the other patient has a progressive multifocal leukoencephalopathy, or PML, a rare and frequently fatal disease of the central nervous system.

"While there is a chance that this isn’t a real signal, we believe the actions and the severity of the adverse events are likely to result in a significant negative impact on the marketability of Tysabri long-term," said ThinkEquity analyst Jeffrey Long-McGie.

"As patients refocus on safety, we believe that Teva’s Copaxone should benefit."

Shares of Biogen plunged 43%, to $28.63, and Elan’s stock crashed 70%, to $8.

Long-McGie predicts the sales increased for Copaxone by $69 million in 2005 and $127 million in 2006.
Analyst Scott Shevick says that every $100 million of Copaxone sales adds 2 cents to Teva’s earnings per share.

Shevick raised his forecast for Copaxone sales to growth of 5% from a 10% decline. It is expected to boost his 2005 earnings outlook to $1.60 a share from $1.57.

Biogen sales for 2004 jumped from $679 million to $2.2 billion. The company reported a profit of $518 million, up 20% from the previous year. But investors were counting on Tysabri to boost income at least 14% this year, predicting that the new product’s sales will eventually top $3 billion a year.

There’s still a chance for Tysabri to make a comeback. Biogen’s scientists have to figure out if the cases of PML were related to Tysabri or to the combination of the product with another drug.