Elan

From NI July/August 2010

Elan is contemplating a spin-off of its drug delivery business, for which Ampyra is likely to be the major revenue-driver. Whether or not the drug discovery and delivery units are kept together or not strikes us as considerably less critical than the questionable prospects for the AD immunotherapy programs (now majority-owned by JNJ) and Transition Therapeutics' ELN-0005, their partnered anti-aggregation agent, for which Phase II data is imminent. The bapineuzumab clinical trial program is going to implode at some point, and it is not clear that Elan has a coherent 'Plan B' in mind. Elan did announce that CEO Kelly Martin will step down in 2012, which will at least spare his successor from having to preside over the bapineuzumab post-mortem.

From NI January 2010

Elan was able to tempt JNJ into buying an 18% chunk of the Company for a billion dollars, and $500 million for half of Elan's Alzheimer's immunotherapeutics program. They tried to sneak in a piece of the Tysabri pie, but Biogen-Idec forced them to back off, since this would have jeopardized Biogen-Idec's scope of action regarding its own Tysabri share. It was almost amusing that Elan and JNJ thought that they could hide the Tysabri transaction from the co-owner. In the end, Elan ended up with $885 million for the stakehold, JNJ ended up with majority control of the joint venture comprising the Alzheimer's portfolio. The deal went a long way towards providing Elan with a solution to its approaching avalanche of debt obligations, and in the process, reduced Elan's untenable exposure to the risks attendant to Alzheimer's immunotherapy. Those risks are likely to loom all-the-larger this year, as we expect the ill-starred bapineuzumab Phase III behemoth to finally collapse under the weight of unimpressive post-mortem findings, and the kind of side effect profile that is proving so problematic for CNS immunotherapies. The first Phase III, already fully enrolled in modified-dosing form, is expected to report late this year. But we would not be surprised to hear of enrollment being suspended in other trial components. Elan and Transition Therapeutics also ran into trouble with ELN-0005, their partnered anti-aggregation agent. The top two doses (1000mg and 2000mg BID) were dropped when the DSMB observed that nine patients had died in those two cohorts; approximately a 5% death rate. The trial will complete its last arm, 250mg BID, a dose so much lower as to raise considerable doubt as to its utility. Enrollment in this 353pt study was completed in October 2008, which means top-line results will likely be available 1Q:11. But we doubt that it will matter.

From NI January 2009

Tysabri's ascent to the billion dollar sales level was slowed by the emergence of more PML cases. Fortunately, the FDA did not respond in knee-jerk fashion, prescribers and patients have to make a challenging risk-benefit decision. More critical to Elan's future was the disappointing bapineuzumab data from Phase II. The inevitable lawsuits have been filed, since Elan was disingenuous in their two-step disclosure of data. Bapineuzumab simply did not perform as hoped in the patient populations where the MoA would be expected to be more impactful. Our view was and is that the data looked very much like a 'random walk' without a dose-response pattern, and a highly idiosyncratic performance curve for the placebo group. Even worse, there were indications that it may be contraindicated for patients with the APOE4 variant, who constitute somewhere between 40-70% of the AD population. Yet Elan and Wyeth had already initiated a giant, 4000 pt Phase III program, which seems highly imprudent given the questions raised by Phase II. Elan also has Transition Therapeutics' ELND005/AZD-103, in Phase II, an anti-fibrillization drug for Alzheimer's. Plus, Elan also has opt-in partnering rights for Lilly's gamma secretase inhibitor LY450139, which has been taken into Phase III, in spite of what looks like a significant risk of serious adverse events. This keeps the fate of Elan intertwined with anti-amyloid approaches, and dependent upon premature Phase III excursions. Given that they are burning cash at a $300 million per year rate, that they have $450 million in cash, and $1.7 billion in debt coming due in the next five years, Elan's fiscal house continues to be in its chronic state of potential disaster. The mid-December spending cuts only save $20-25 million annually, more symbolic than substantive. They hope to raise up to $500 million by mid-2009 via outlicensing, but we see nothing in their portfolio that would generate that kind of upfront cash. Elan's judgment; in terms of its fiscal planning, its misguided appraisal of its inhouse assets, and the overcommitment to amyloid therapies sans diversification, has been dubious. Given the trouble they ran into a few years back in the wake of their off-balance sheet maneuvers, one would think that they would have learned to rein in their gambling instincts. But in their case, arrogance has trumped caution.