Elan woes see shares drop

The stock price of Dublin-based Elan Corporation, a major drug company, declined by as much as 11 percent after the Food And Drug Administration (FDA) announced that it needed more time before ruling on whether Tysabri, a drug for the treatment of multiple sclerosis, could return to the market.
Tysabri is a joint venture between Elan and Boston-based Biogen. Initial tests had shown it to be significantly more effective than existing treatments in easing the symptoms of multiple sclerosis. Also, because it was administered via a monthly injection at a doctor’s office rather than through the more frequent procedures that are necessary for most other treatments, it was regarded as offering greater convenience to patients.
Some projections had suggested that annual sales of Tysabri, which costs about $23,000 for one year’s treatment for one person, could reach $3bn.
However, many of the hopes for Tysabri crashed last spring. Sales were suspended on February 28 2005 after it was discovered that a patient who had used the drug during its trial phase had contracted a very rare disease of the brain and nervous system. That person subsequently died from the condition (progressive multiphocal leukoencephalopathy, or PML), as did another Tysabri user. Another case of PML was also discovered, although a fatality did not result.
Elan and Biogen have always publicly expressed confidence that Tysabri will return to the market. They point out that no definitive link between the drug and PML has ever been proven, and that both the users who died from PML were also using other drug treatments. Confidence in Tysabri’s prospects had been growing in recent weeks, in part because an advisory committee to the FDA had unanimously recommended its reintroduction earlier this month.
However, Elan announced last week that the FDA had requested more time to consider the issue. The regulatory body can now take until late June to deliver its decision, though it may do so at any point between now and then. In a statement, the FDA said that the Tysabri application “continues to be a high priority”.
Shares in Elan immediately dipped 8 percent in Ireland, while they opened 5 percent lower the following morning on Wall Street. At time of going to press, Elan shares were trading at $14.11 in New York. Earlier this month they had soared to over $15.50 in the aftermath of the favorable ruling by the FDA’s advisory committee.
Elan’s troubles need to put in context, however. The company has been on a long rollercoaster ride. When the Tysabri controversy first hit, the share price fell to less than $4, having been at more than $27 only weeks before. The day the drug’s suspension was announced, according to Bloomberg News, a combined $17.8bn was knocked off the value of Elan and Biogen.
In Ireland, the company’s share price is a key mover of the Irish stock market, and many pension and investment funds were hit hard in the aftermath.
Although Elan’s executives remain bullish and some analysts continue to predict annual peak sales of well over $1bn, rivals are nonetheless seeing opportunity in Tysabri’s travails.
A senior vice president of a rival company told Dow Jones recently that Tysabri was “a drug of last resort.” Andrew Galazka of Serono added that “Tysabri’s risks are not yet well understood.” Serono is the company behind Rebif, which is currently the third-placed MS drug in the US.
Serono’s CFO, Stuart Grant, also noted that “We do see a possibility of Tysabri coming back, and we have our own internal battle plan to combat re-entry.”
A spokesman for Biogen hit back at potential rivals in an interview with the Boston Globe.
“Our effort to bring Tysabri back to MS patients is our attempt to provide them with new hope and additional choices,” said Tim Hunt. ‘”In contrast, a small number of drug companies are clearly putting corporate profits ahead of patients.”
The battle is only likely to get more bitter. As the Globe noted, the worldwide market for MS drugs is worth around $5bn annually.