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ELAN BETWEEN THE PML TEST AND ALZHEIMER'S DISEASE PILL

Prohost Biotech - Tuesday, December 28, 2010

A few days before Elan (ELN) submitted a supplemental Biologics License Application (sBLA) to the United States FDA and a Type II Variation to the European Medicines Agency (EMA) regarding Tysabri’s label update, investors began to accumulate ELN. The change in label includes a test that can pinpoint patients who are susceptible to developing Progressive multifocal leukoencephalopathy (PML) while on Tysabri. Informed investors knew that the test could double or more Tysabri’s current one billion sales’ revenues.

Tysabri is a breakthrough drug developed for multiple sclerosis (MS) that has changed the prognosis of this crippling disease. The drug has also been approved for Crohn’s disease. The problem that limits expected huge sales of this unique drug is that a very small percentage of patients taking the drug for over two years, or in combination with other MS drugs, or immunosuppressant’s might develop AML, which is a serious, but rare CNS infection.

The announcement was, in fact, a declaration of the success of the test. The presence of such a test would definitely comfort physicians and patients, lower the degree of skepticism towards the drug’s safety and open the door for many MS patients who were deprived from Tysabri’s efficacy, which is far more reaching than all the currently available MS drugs, old and new.

The announcement, no doubt, is extremely good news for Elan. Lowering the incidence of PML would tremendously increase the sales of Tysabri in the 45 countries where the drug has been approved and marketed. This means that Elan’s revenues from this drug alone could soar for MS patients and also for Crohn’s disease patients. In the presence of such a test, the state-of-the-art drug can easily be approved for many other autoimmune neurological and non-neurological diseases. 

A couple of days following the announcement of the PML test, an abrupt selling of ELN followed the initial stock buying. The reason for the pessimism this time was another announcement that Transition Therapeutics’ (TTHI), Elan’s partner on its oral Alzheimer’s disease drug ELND005, has decided to give back its 30% partnership in the AD drug. It is obvious that Transition Therapeutics wanted to stop funding the drug development at any cost. As a matter of fact, instead of getting an expected Phase 3 large milestone payment, it accepted $9 million at the time of the signing, and a promise of around $100 million in various milestone payments and royalties ranging from 8% to 15% on net sales if ELND005 would be approved.

As much as the test for PML susceptibility is clearly good news for Elan, Transition Therapeutics’ decision to abandon Elan’s Alzheimer’s program was puzzling to investors. Some believed that abandoning the rights to Alzheimer’s drug was a sign of a drug failure, while others believed that Transition Therapeutics decision was based on personal circumstances. Many investors are still wondering about what reason, besides failure of safety or lack of efficacy, could force a drug maker to give away its rights to a promising drug?

We believe that the decision has nothing to do with ELND005 status. Transition Therapeutics’ decision seems to be in need for money for the development of its proprietary promising small molecule anti-inflammatory drug TT-301. The drug has demonstrated efficacy in preclinical models of rheumatoid arthritis (RA), intracerebral haemorrhage (IC) and traumatic brain injury (TBI). The urgency in developing this drug emanates from the fact that the firm had to stop further development of its Type 2 gastrin analogue diabetes drug TT-223, which, in combination with Eli Lilly proprietary GLP-1 analogue, has failed to meet the efficacy endpoints in mid-phase trials.

Currently, we repeat, the most important news for Elan is coming from Tysabri’s new test for PML susceptibility. With regard to its Alzheimer’s disease oral drug ELND005, although the safety of the drug has been proven in Phase II trials at the small 250 mg dose, efficacy at this small dose needs more testing on more patients for a longer time. Nevertheless, the drug has moved to phase III. The question is: Will the drug at the low, 250 mg dose be able to show better efficacy than the currently prescribed drugs for mild and moderate AD?

For many reasons, especially the minute efficacy of the current drugs, We believe the answer is yes.

We long Elan

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