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MARKET SAVVY | SAVVY CONFIDENTIAL: A Briefing for Investors

Immunex Leaps 33% on Drug News; Gain Fuels Rise in Biotech Sector

May 12, 1999|PAUL JACOBS

Immunex Corp. shares leaped 33% on Tuesday after a company report that its leading drug, Enbrel, apparently slows the progress of rheumatoid arthritis, as well as treats the symptoms of the painfully crippling disease.

The stock's one-day gain--its biggest in more than a decade and extraordinary even in the volatile biotech sector--was largely responsible for rises in excess of 4% for the American Stock Exchange and Nasdaq biotech indexes.

Though the biotech sector has had a rocky time in the last few years, the stocks have regained momentum in recent months. In fact, the sector hasn't been doing this well since the early 1990s. A handful of large-cap companies--with actual products on the market and profits on their ledgers--have led the way.

The Amex index of 15 major biotech stocks is up 28% since November to 209.56. Its all-time high of 256.60 was reached in January 1992.

Based on its latest test results, Immunex said it expects to apply to the Food and Drug Administration to expand labeled uses for the medication, which is now limited to patients with moderate to severe cases of rheumatoid arthritis who have tried other treatments. Physicians, however, are free to prescribe products for so-called off-labeled uses, and many may begin doing so after they see the results of the latest clinical trial.

Some analysts believe that the expanded use of the drug could increase annual sales of Enbrel from a projected $300 million to as much as $1.5 billion.

The surge in Immunex shares, which gained $35.31 to close at $142.31 on Nasdaq, vaulted the Seattle-based company past Genentech in value. With a market capitalization of $11.5 billion, Immunex is now second only to Amgen, which is worth $32.6 billion.

The company, which went public in 1983, has several other products on the market, but it is only the FDA approval of Enbrel in November that has brought sales-based profitability in the latest quarter. The company has reported profit in the past, but only because of payments from partners--not product sales.

It markets the drug with Wyeth Ayerst, a division of American Home Products, which holds the majority of Immunex shares.

Rheumatoid arthritis is an autoimmune disease--a disorder in which the immune system attacks and erodes the patient's joints. It affects 2.5 million people in the U.S.

Enbrel sops up the naturally occurring agent that triggers this destructive immune response. The study results released Monday compared Enbrel with methotrexate, one of the powerful drugs currently used to treat advanced stages of the disease. The research showed that Enbrel can slow joint erosion more safely than methotrexate, a drug so powerful that it is also used to treat cancer.

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Biotech's Big Rebound

Major biotechnology stocks have rallied sharply this year, lifting the American Stock Exchange biotech index to its highest level since its all-time high in early 1992. The 15-stock index includes such names as Immunex, Amgen, Cephalon and Biogen. Quarterly data, and latest:

Jan. 14, 1992: 256.60

Tuesday: 209.56

Source: Bloomberg News

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