Alert The Elanians: A Bull's On The Loose


Don't look now, but in the first week of the new year shares of Elan are up 30 percent. ELN stock lost nearly three-quarters of its value last year on safety concerns about the multiple sclerosis drug Tysabri, which it shares with Biogen Idec , and efficacy concerns over the Alzheimer's drug it's developing with Wyeth .

But in a research note to clients this morning biotech analyst Bill Tanner at Leerink Swann says, ""We believe ELN shares could re-emerge as an attractive opportunity for healthcare investors by virtue of the market's overly aggressive discounting of the value of Tysabri and the Alzheimer's Disease platform...." Leerink Swann may trade in Elan and it makes a market in BIIB.

So, what explains the new sentiment in the new year? Tanner speculates, "We wonder whether investors' desire to liquidate ELN positions and unwillingness to initiate new ones by others until the year concluded created selling pressure that may abate going forward." But recently a lot of the selling pressure was caused by new cases, including a death, of the rare brain disorder (PML) associated with Tysabri.

Embattled Elan CEO Kelly Martin is presenting at the JPMorgan Healthcare Conference in San Francisco next Tuesday at 11:30 a.m. PT. Biogen Idec CEO Jim Mullen presents at 8 a.m. PT the same day. And analysts believe the companies will release updated numbers during their remarks about Tysabri usage in the fourth quarter of last year.

On a conference call with clients yesterday Deutsche Bank biotech analyst Mark Schoenebaum and his team said so-called "new patient adds" (in other words, people going on Tysabri for the first time) may have slowed from 275 per week in the third quarter to around 180 per week in the fourth. That's a crucial metric because, according to DB, every 10 new patient adds each week equals $2-$3 million in quarterly revenue.

ELN is trading around eight bucks. Leerink Swann thinks it could be worth approximately $20 by the end of this year. But that's still nearly half the value the shares had before the hotly debated mid-stage Alzheimer's drug test results came out last year.

    • Biogen shares fall on JP Morgan downgrade

Questions? Comments?