Biogen accused of insider dealing

A class action lawsuit has been taken in the United States against directors of Biogen Idec alleging insider dealing in the shares.

Biogen and Elan announced they were withdrawing their multiple sclerosis drug Tysabri from the market last Monday, resulting in a huge crash in their respective share prices which fell 42% and by 70% on the day.

In the weeks leading up to the shock announcement, board members and executives made millions selling Biogen shares.

One of those named in the class action is executive chairman William Rastetter, who on 15 February, sold 120,313 shares for €5.65 million.

On 17 February - the day before Biogen informed the Food and Drugs Administration a patient had died while being treated with Tysabri - the board approved bonuses of €3.48m for the company’s executives.

Other executives were also involved including Thomas Bucknum who sold €1.47m worth of shares.

The charges allege the defendants suppressed information about the dangerous side effects the multiple sclerosis drug treatment had on the immune system for financial gain. Despite the huge controversy, analysts expect the MS drug to return to the market with restricted use.

Since Irish drugs group Elan and its US partner Biogen Idec withdrew Tysabri on Monday, the shares in the two companies have been decimated.

Elan’s shares took another pasting yesterday and fell 11.27% or by 71 cents to €5.59.

Before news of the drug’s withdrawal hit the markets, the shares were trading up at €20.30.

Further pressure on the shares is expected after Merrill Lynch analyst Erica Whittaker said Tysabri may return to the market with restrictions that could limit sales to less than half of the €4 billion once projected.

Ian Hunter of Goodbody Stockbrokers has cut his sales target for the drug to $350m against an original forecast of $2bn for 2009.

Meanwhile, concerns have grown about the role of the Food and Drugs Administration in the approval of drugs for use in humans which sanctioned the use of Tysabri ahead of time.

It has also emerged that an advisory committee of the FDA voted on 18 February to have three painkillers - Vioxx, Celebrex and Bextra - retained on the market despite serious concerns over their safety.

According to the report in the New York times, plenty of scientific evidence exists suggesting the drugs can cause heart attack and strokes.

The paper alleged 10 of the 32 committee members have financial ties to the pharmaceutical manufacturers involved.

The conflict involves consulting work carried out by the 10, who were unnamed, for Merck, maker of Vioxx and Pfizer, maker of the other two products.

The report said that if those 10 members were excluded from the vote, the drugs in question - which are popular pain killers - would have been withdrawn from the market.