Biogen can bounce back
By Janice Revell

(FORTUNE Magazine) – While biotech stocks have always been a high-risk proposition, until recently Biogen Idec (BIIB, $38) was all about sky-high rewards: By the end of 2004 the stock had racked up a ten-year total return of 18,707%, by far the biggest gain of any stock in the S&P 500 over that span. Then, in late February, after confirming that a patient taking its promising new multiple sclerosis drug Tysabri had died of a rare neurological disorder, Biogen announced that it was pulling the medication off the market. In one day, the company's stock plunged by more than 40%, shedding $9.5 billion in market value. Tysabri's co-developer, Elan Corp. (ELN, $6), took an even worse beating, plummeting some 70%. Could it be a good time to scoop up some shares?

Don't bet on Elan. The company is essentially a one-product player--and that product is off the shelf indefinitely. But Biogen has a stable of bestsellers, including the highly successful cancer drug Rituxan. Smith Barney analyst Elise Wang figures that if Tysabri never makes it back to market, Biogen is still worth $45 per share based on an expected 2005 EPS of $1.85. If the drug returns, even to limited sales, Wang says the stock would easily be worth $49. Of course, there could also be more bad news from patients who took Tysabri. There's some definite upside potential here, but don't wager the mortgage payment. -- Janice Revell