Elan’s problems deepen

The discovery was made as the company and its partner, Biogen, reviewed results from earlier clinical trials. It appears that the patient, who died in December 2003, was misdiagnosed as having suffered from cancer of the brain, when in fact the person’s demise came about as a result of an uncommon condition known as progressive multiphocal leukencephalopathy.
The latest revelation was particularly damaging to the Irish corporation because the two previous cases of the disease had occurred in people who had been taking Tysabri in combination with another drug, Avonex. In the latest instance, the patient had not been taking Avonex.
Elan has noted, however, that the person was taking a range of other drugs intended to suppress the immune system, and that one or more of these may have had a negative effect. No conclusive link between PML and Tysabri has yet been proven, despite worrying circumstantial evidence.
Tysabri was launched amid much fanfare in the U.S. in November. Trials had shown it to be remarkably successful in the treatment of multiple sclerosis. But sales were suspended in February after the first two cases of PML were discovered. One of the people affected subsequently died.
The first news relating to PML caused consternation among patients who had been taking Tysabri. On the markets, the company’s total value dropped by $7 billion in a single day as investors rushed to sell off their shares.
When the third case became public last week, Elan’s share price was cut in half. The shares have recovered slightly since then, trading at $3.78 by Tuesday morning. Before the first cases of PML came to light, its price was almost $19.
The third occurrence of PML puts the long-term future of Tysabri in serious doubt. After the first two cases, there had been hopes that the problem may have been rooted in the combination of Tysabri and Avonex, and that Tysabri could be reintroduced in the fall. That now seems unlikely.
As the questions surrounding Tysabri have multiplied, many market analysts have become bearish about Elan’s future. Some have speculated that the company may be forced to sell important assets if it is to keep its commitments to repay its debts. Repayments are due to begin in 2008.
Elan spokesperson Anita Kawatra said that the company would continue to review results from its clinical trials of Tysabri before making any fundamental decisions on the drug’s future. While there is a possibility that the review might be concluded by the fall, Kawatra said that the importance of conducting a through review would take precedence over trying to meet a predetermined deadline.
Kawatra also suggested that concerns about debt were misplaced, noting that the company has about $1.5 billion in cash at present.
Although the recent developments for Elan have been grim, a handful of market analysts believe that shares of the company have now been oversold. David Marshall, an analyst with NCB Stockbrokers in Dublin, caused a stir on Thursday by changing his rating of the stock from “hold” to “buy.”
“My point is that the market has completely discounted Tysabri, whereas at worst it is likely to have a residual value of at least a couple of dollars per share,” Marshall told the Echo.
“In addition, cash flow concerns are probably overdone at this point, given that by fall the path forward should be much clearer.”
While the market twists and turns, however, the people most disappointed are those who suffer from multiple sclerosis. Tysabri had seemed to offer great promise of relief.
Tysabri never went on sale in Ireland. But according to Graham Love, chief executive of M.S. Ireland, an organization that works on behalf of people who have the disease, there were high hopes that Tysabri could “be something of a wonder drug.”
Love said that the discovery of the instances of PML came as “devastating news.” He added that no other drug, either currently available or close to coming on the market, had been shown to be anywhere near as effective as Tysabri in the treatment of M.S.