The biotech sector suffered a setback when BIOGEN IDEC (BIIB, $41.26, +2.61) and ELAN (ELN, $7.97, -0.03) suspended sales and marketing of the promising multiple sclerosis drug Tysabri. While the companies' move and the market reaction to it could raise investor anxiety about how safety risks affect stock valuations, a day after their announcement biotech stocks posted modest rebounds. Biogen added 7%, while Elan was flat. Among the biotech stocks we follow, AMGEN (AMGN, $62.24, +0.63), GENENTECH (DNA, $47.56, +0.36), and INVITROGEN (IVGN, $70.56, +0.60) all finished in the black. It is too early to tell whether the focus on safety concerns will hang like a cloud over the sector as it has in the pharmaceutical sector, but we do consider today's action positive.
Biogen and/or Elan could be worth taking a closer look at, particularly as more details about the prospects for Tysabri become clear. However, note that Biogen's problems extend beyond the drug. The day before the firm advised the FDA on the health problems associated with the drug, executives pulled in millions in bonuses and stock sales.