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Biogen, Celgene, Gilead Hit Highs On EU Drug News

Top-rated biotechs Biogen Idec, Gilead Sciences and Celgene all got good news from Europe Friday, sending their stocks to all-time highs.

Biogen's (BIIB) multiple sclerosis drug Tecfidera moved a step closer to launch in the European Union after it was ruled as a "new active substance" by the EU's Committee for Medicinal Products for Human Use (CHMP). Under EU rules, a new active substance can be protected from competition for 10 years. That gives the product more solid protection than its patents, which are subject to legal challenges after a few years.

Tecfidera, launched in the U.S. earlier this year, got a positive panel vote in Europe in March, but Biogen pushed back its launch while it negotiated with regulators over how new the active substance Tecfidera actually is. Similar compounds exist for non-MS uses.

Stronger Sales, Shares

Analysts say uncertainty over the EU ruling put a damper on the stock, which had been hitting resistance at around 250 after the delay was announced. There was some question whether Biogen would even launch Tecfidera in Europe without exclusivity.

"This removes a big overhang," wrote Deutsche Bank analyst Robyn Karnauskas as she raised her price target to 340 from 270. "Given the solid uptake of Tecfidera in the U.S., we are raising peak market share of Tecfidera to 30% vs. 25% previously and now model 2020 worldwide sales at $6 billion vs. $5 billion previously.

Biogen sales growth has already accelerated for the past four quarters, from 6% to 32%, with gains ramping up on Tecfidera's U.S. launch.

Citi also raised the price target, to 320 from 260.

Biogen shares shot up 13% to 285.62.

Meanwhile, Gilead's (GILD) hepatitis C drug sofosbuvir won a CHMP vote earlier than Wall Street expected. The committee recommended approving sofosbuvir, now branded Sovaldi, following an accelerated review procedure after the drug performed very well in clinical trials. The European Commission usually follows the CHMP's advice. Gilead said the drug could launch in Q1 if all goes well.

2014 Upside

Analyst Michael Yee of RBC Capital Markets wrote in a client note that this decision came at least a month ahead of expectations, adding potential upside to Sovaldi's 2014 sales. The drug is widely expected to win U.S. approval by early December.

"We think they'll do $2 billion in the U.S. alone, and EU could add a few hundred million as its country-by-country launch in EU starting primarily with Germany and other countries can take up to 6-12 months for full reimbursement/pricing and distribution launch," Yee wrote.

Analysts already had high expectations for Sovaldi, which promises the first treatment for the disease without interferon. Current consensus calls for $8 billion in sales by 2018.

Gilead's stock rose nearly 4% Friday to 74.27.

CHMP also endorsed Celgene's Abraxane as a treatment for pancreatic cancer, in combination with gemcitabine (better known as Eli Lilly's (LLY) Gemzar). Abraxane has been on the market for breast cancer since 2005, but since Celgene bought its developer, Abraxis BioScience, in 2010 it's been testing new indications. In the U.S. it was approved for lung cancer a year ago and for pancreatic cancer in September, but so far in Europe it's still authorized only for breast cancer.

Celgene's stock climbed 3% to 163.33, its seventh straight gain.