ELAN, the Athlone-based pharmaceutical company, has given something of a rollercoaster ride to investors in recent years.

The company, which is headed up by Kelly Martin and is the seventh-largest on the Irish stock exchange, saw the value of its shares plummet by 96% in the first half of 2002 after an investigation into its accounting methods.

In 2005, the death of some patients taking part in clinical trials of its Alzheimer’s drug, Tysabri, caused another crash. Its share price has since made a moderate recovery, but continuing uncertainties over the future of Tysabri have seen it put in a lacklustre performance of late.

The experts below have been selected for their skills in a number of investment areas. They, or the funds they manage, may hold shares in the companies or sectors discussed.

Kevin McConnell, head of research,
Bloxham Stockbrokers







WHEN we covered Elan last June, we stated that, given the complexity of Tysabri’s roll-out over the first six months and the reluctance of doctors to prescribe the drug initially, the risk of it missing analyst sales estimates outweighed the probability of upside potential.

Since then, there has been positive feedback from doctors and global net sales of Tysabri in the third quarter of just $8m (€6.2m), has led to a number of downgrades for Tysabri revenues in 2006, confirming our thesis.

Tysabri still remains the core element of the stock’s valuation and earnings forecasts. The group requires 15,000 patients at $28,400 per year to break even on Tysabri.

With 4,700 currently signed up on the Touch programme, the heavily monitored pre-testing needed before patient suitability approval, there has been a slow uptake of the drug.

The group continues to believe that, after training at infusion centres across America has been completed, the uptake on Tysabri will accelerate significantly. At the current valuation, Tysabri needs to generate more than $1.25 billion in sales by 2009 to justify Elan’s current valuation.

Coming off a quarter that produced just $8m in sales, the scale of the task that faces Elan and Biogen Idec, its partner on Tysabri, is considerable.

If Tysabri is to reach blockbuster status, Elan needs it to gain traction and market share quickly before potential competitors reach the market with oral therapies. These are a much less complex form of treatment and could be launched by 2010.

Novartis recently released impressive data from its oral drug in phase-II testing that showed up to 77% of patients remained free of relapses over two years against 67% for Tysabri. The data, however, is not directly comparable.

As for Elan’s much-hyped Alzheimer’s product, AAB- 001, it looks likely the phase-II data will not be positive enough to progress to phase III this year, leaving only the uncertainty of Tysabri’s sales potential as the key catalyst over the coming 12 months.



Judgment: speculative buy below €10.50

Ian Hunter, senior analyst,
Goodbody Stockbrokers







THE two main factors that should drive Elan’s share price this year are the performance of Tysabri and the progress of drugs for the treatment of Alzheimer’s disease, which are in the pipeline.

Both should come into play early in the year. The stock market will be tracking the number of patients being enrolled into Tysabri treatment programmes and awaiting the decision, if any, on the early switching of Alzheimer’s drug AAB-001 into more advanced clinical trials.

For what was originally seen to be a large, blockbuster drug entering an under-served market, the uptake of Tysabri through the second half of 2006 was disappointing.

In America, the risk management programme (which includes mandatory training and patient/physician registration) has been slower to roll out than originally thought by Elan and its partner Biogen Idec.

In the European Union, although approved for use, the main stumbling block to widespread prescription and use is reimbursement. In countries where these drugs are invariably paid for by the state, approval is only the first hurdle.

To date, we understand that it has only been cleared for payment in Germany and Ireland, although Elan is confident it will gain reimbursement “approval” in all EU states this year.

Alzheimer’s is a growing market, in which existing drugs provide little relief. Elan has a number of drugs in the pipeline that could potentially be beneficial.

The most advanced, AAB-001, is currently in phase-II trials. With its partner Wyeth, Elan recently took an interim look at the data. If it is strong, it will announce the early switch into a phase-III trial in the first three months of this year. If not, we would not expect an announcement until mid to late 2007.

Over the longer term, strong Tysabri sales and pipeline progress in drugs combating Alzheimer’s should see positive momentum return to the stock price. However, we remain cautious.



Judgment: add

The firm at a glance

Share price: €10.60
Market cap: €4.94 billion
Year end: Dec 07
EPS forecast: -53c (EU); -69c (US) Dividend forecast: N/A
Leading shareholders: FMR Corp 14.1%, Capital Research & Mgt 8.2%, TR Price 3.6%