NEW YORK – Biogen Inc. (BGEN) Friday said earnings would be lower than expected as increased competition eroded sales of its only product, multiple sclerosis drug Avonex.
Biogen, based in Cambridge, Massachusetts, cut its second-quarter sales forecast for the second time in two months for Avonex, reducing its estimate by $20 million to between $170 million and $180 million.
The decline will cut Biogen's earnings by 9 cents a share to between 28 cents and 32 cents in the second quarter. Analysts had expected earnings of 40 cents a share, down from 47 cents a year earlier, according to Thomson First Call.
"This is very disappointing and very unexpected," said Jennifer Chao, an analyst at Leerink, Swann & Co.
Biogen's shares closed down $5.54, or 11.6 percent, at $42.16 on the Nasdaq after hitting a session low of $40.20.
The company blamed a weakening overall market for multiple sclerosis drugs for the revised forecast, citing data from drug research firm IMS. But analysts were skeptical. They pressed Biogen's executives on a conference call to explain why the market suddenly became weak in March, just when Serono SA's rival drug Rebif entered the U.S. market.
Serono last month said it was on track to post U.S. Rebif sales of $60 million to $70 million this year. The European company's chief executive, Ernesto Bertarelli, said that in the four weeks to May 3, new prescriptions for Rebif rose 269 percent compared to the previous four weeks.
Biogen's chief executive, James Mullen, said he couldn't explain the softening of the market.
"We've seen this before," he said, "Periods where the market slowed down and then speeded up."
Serono spokeswoman Carolyn Castel said she is not aware of any market softening: "At the moment we have no reason to change our expectations of the market or for Rebif," she said. Germany's Schering AG, which makes the multiple sclerosis drug Betaseron, said it is holding to its 2002 forecast of 15 percent sales growth.
Biogen said wholesalers reduced their supplies of Avonex to 10 days from 15 days in April and May, in part to make room for Rebif. The inventory reduction will translate into about $11 million less revenue for Biogen in the second quarter.
The company said its market share fell to 56.9 percent in April from 57.4 percent in December.
Biogen expects operating earnings for the full year of $1.50 to $1.60 per share. Analysts had expected $1.72 a share, which was already down from $1.90 in 2001.
The news marks another setback for the beleaguered biotech industry, which is struggling to recover from a series of regulatory delays and rejections of key experimental medicines. The American Stock Exchange biotechnology index has fallen nearly 37 percent since January to a two-year low.
For the full year, the company said it expects Avonex revenue to be between $730 million and $755 million, down from an April forecast of $1.1 billion.
"This indicates more weakness in the Avonex franchise than anyone had anticipated and increases Biogen's dependence on Amevive," said Mark Schoenebaum, analyst for CIBC World Markets, referring to Biogen's psoriasis drug which was recommended for approval by an advisory panel to U.S. regulators last month. Official approval of the drug is expected later this summer.