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12:00 AM
Apr 01, 2002
 |  BioCentury  |  Finance

Europe: All news is bad news

Europe provided a mixed bag of good news and bad for the quarter, but investor perception has been almost entirely negative for all news. Beneath the negative feeling, fund managers believe they are seeing a strengthening of fundamentals, but this didn't stop the markets from punishing biotech stocks, as the BioCentury London index finished down 22% and the BioCentury Europe index lost 10%.

The issue for the group now is whether there's enough good news teed up for the rest of the year both to provide some gains for investors and to reopen the public equity markets - and whether investors are inclined to listen.

Leading the bad news were worries over the accounting practices of Elan Corp. plc (ELN, Dublin, Ireland) in the wake of the Enron debacle, which cost the company $10 billion of its market cap over the quarter. ELN might trade on the New York Stock Exchange, but it's one of the bellwether biotechs of Europe.

Key London stocks were hurt by competitive pressures. Thus Celltech Group plc (LSE:CCH; CCL, Slough, U.K.) fell out of the FTSE100 index and lost £635 million ($926.6 million) of its market value over the quarter. Apart from the general downdraft in London, investors were concerned with competition for the company's Metadate CD methylphenidate for attention deficit hyperactivity disorder (ADHD).

"There is undoubtedly competition in the ADHD segment," said CCH spokesperson Richard Bungay. "It comes from so many other ADHD products on the market, including the Barr generic for Adderall. People have taken the view that this is a very competitive market. The second aspect is the slow take-up with Metadate, and analysts have reined back in their earnings estimates."

Bungay did not see the FDA approval of Focalin dexmethylphenidate to treat ADHD from Celgene Corp. (CELG, Warren, N.J.) and partner Novartis AG (NVS; SWX:NOVN, Basel, Switzerland) as the competitive risk to Metadate.

"Long term our story looks good," he argued. "We expect CDP870 to enter into Phase II in rheumatoid arthritis in the second quarter and Phase III data on Humicade to treat Chrohn's disease later on, with a filing in Q4."

Similarly, news that Barr Laboratories (BRL) had launched its generic Adderall has helped to pull down Shire Pharmaceuticals Group plc (LSE:SHP; SHPGY, Basingstoke, U.K.). The company now has a problem holding onto its FTSE100 rating, as its market cap fell £1.5 billion ($2.2 billion) to £2.6 billion ($3.7 billion) on the quarter.

Last Thursday, SHP submitted an MAA for European marketing approval of its Xagrid anagrelide to treat essential thrombocythemia. The treatment already is marketed in the U.S. as Agrylin.

Investors also registered their disillusionment with the bioinformatics space, as Lion bioscience AG (NMarkt:LIO; LEON, Heidelberg, Germany) lost E117 million ($103 million) of its market cap, falling to a valuation of E230 million ($202 million), on concerns that the company has no i-biology deal on the table. Even though LIO completed its acquisition of rival NetGenics Inc. (Cleveland, Ohio), investors have yet to come back into the stock....

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