Saturday, July 16, 2005

Betting on Tysabri

on february 28th, elan and biogen idec pulled tysabri from sales and clinical trials. 2 patients who had been taking a combination of avonex and tysabri (avonex is an ms treatment by biogen) developed PML, a rare disease that causes destruction of brain tissue. since then, i've been dilligently following the developments as the two companies review the drug for a possible reintroduction to the market. my opinion is that the situation is greatly misunderstood by investors because of prejudiced coverage by the media and institutions. the purpose of this post is to put into perspective what has happened and for me to provide commentary to help you understand what is really going on. PML CASE #3 during the sgcowen health conference in mid-march, ceo kelly martin estimated that reviews would be completed by "the end of summer." at this time, the stock was trading around $7. on march 31st though, the stock tumbled from ~$7 to ~$3 overnight (taking me down with it). a 3rd confirmed case of PML was announced by the 2 companies. the 3rd patient was diagnosed with pml post-mortem (he died in 2003). the 3rd pml case had been on tysabri monotherapy in contrast to the first 2 pml cases who were on combination therapy (avonex+tysabri). the significance of patient 3 is that s/he was discovered to have been on other immunosuppressive drugs. [EDIT: patient 3 apparently had a history of treatments with steroids, remicade, and imuran (used in patients of organ transplants to lower the immune response so that the body does not reject the organ, ie an IMMUNOSUPPRESSANT). please refer to ThisIsMs for a full discussion on the effects of each drug] the key fact to keep in mind is that PML is already known to arise in immunosuppressed patients. since there have been no confirmed cases in tysabri monotherapy (cases 4 and 5 are unconfirmed), it can be speculated that combo therapy could be the culprit. ELAN AGM elan's AGM, which took place at the end of may, was very upbeat. kelly martin stated that it was a matter of "when, not if" tysabri would find a path back to ms patients. i listened to this AGM webcast live and believe me, it inspired a lot of confidence and excitement in my investment w/ elan. if you're new to elan, you should definitely listen in to the recorded AGM. the important thing to get from the AGM is that it was the last time that ELN officially briefed investors on tysabri. outlook on tysabri has been pretty grim lately, but keep in mind that nothing has officially changed. things brings us to PML "cases" 4 and 5. PML "CASES" 4 and 5 a few weeks after ELN's successful AGM, and 1 day suspiciously before BIIB's AGM, jeff krasner of the boston globe published a frontpage article which bore the headline: "A fourth death may be tied to Biogen's MS drug." this article alone caused eln stock to plunge from ~$8 to as low as $6.10 the next day. elan's PPS has yet to recover from the damage done by this article. shouldn't someone be held responsible for the losses sustained by shareholders like me? this "case" has since been rejected by biogen over a CC. in fact, there exists an article saying that the patient referred to as the '4th case' was shopping when she found out that she had "died." considering its been over a month since this report, we can assume that this case is not valid since ELN and BIIB would have been required by the SEC to report it officially. the same can be said about the '5th case' which was brought up by the WSJ (i dont have a subscription to read about it). so, in other words, there have been 3 confirmed cases of PML so far. 2 are combination therapy patients and the other is a monotherapy but immunosuppressed patient. SALE OF BIOGEN'S OCEANSIDE PLANT biogen recently sold its drug manufacturing plant in oceanside, ca to genentech. a lot of critics claimed that revealed biogen's lack of faith in tysabri return (oceanside was slated to produce tysabri). however, it is important to point out that biib has also developed a high titer method of manufacturing tysabri, meaning a higher production capacity for the drug. also keep in mind that the oceanside plant was part of biogens acquisition of idec. SIGNS OF A COMPANY IN TROUBLE? awhile ago, eln's chairman of the board, kyran [edited for spelling] mclaughlin, purchased 90K shares of eln. investors approved of a sharebuyback program during the AGM. eln posted very positive crohn's trial results a few weeks ago. eln will post breakeven EBITDA even without tysabri in its pipeline. eln has a very promising drug for alzheimers in phase2 that can be a even greater blockbuster drug than tysabri. eln is retiring some of its 1billion dollar debt that is due in 2008. elan's nanotech is starting to take off. the new england journal of medicine is considering the possibility of tysabri's return from a scientific standpoint. are these signs of a company in trouble? with the exception of NCB and a few other brokerages, everyone seems to love to hate elan. but hey, at least now they're actualy considering that tysabri will back. a few months ago, pretty much every analyst on wallst claimed that there was no chance tysabri would ever return. WRAP UP this is a great drug with great potential. for now, all signs point to tysabri monotherapy. as avonex combo therapy becomes singaled out as the culprit, and as avonex goes generic, biogen and elan will have to share tysabri as their sole flagship MS drug. the patient reviews should be finished any week now, and a risk/benefit profile revised by the fda. the speculated timeframes for the completion of reviews range from as early as Q3 2005 to as late as Q1 2006. kelly martin and jim mullen seem to continue to stand by their "end of summer" timeframe. if you'd like to read about tysabri/pml from a very scientific and medical standpoint, go over to the yahoo msg boards and search for posts by 'pinvestment' and 'neuro1111' [edited for spelling], both very well-versed scientists who graciously share their knowledge on the situation. during the writing of this post, i found the tixx webpage to be very helpful. they have a lot of cool documents on the site too. check out their site if you'd like to continue researching elan. good luck betting on tysabri. thanks for reading. -JW

9 Comments:

Anonymous Anonymous said...

John,
Don't forget to add that elan is holding its conference call on July 28. It will give the CEO a chance to update us the reviews.

7/17/2005 11:08:00 AM  
Anonymous Anonymous said...

Also, the ELN is one of the leading Nano companies. It has locked up three big drugs and the pipeline is very full. Royalties on this business are VERY HIGH.

7/17/2005 12:35:00 PM  
Blogger BillKirn said...

Keep in mind that Tysabri will take over much of the market serviced by Avonex and much of the immunosuppression therapies presently servicing the MS population. Biogen will actually increase their market penetration and revenue even though they will loose major Avonex revenues. Minimal side affects, greater efficacy, and improved life style results will be compelling and CD will become an additional market in a year or so.

7/17/2005 02:10:00 PM  
Anonymous Anonymous said...

John
A good idea. well done.
you must change the background colour however. Good presentation standards call for a light pastel shade background and strong colour for the textual foreground. 2 other points: 1) Chairman of Elan is Kyran (Not kylan) McLaughlin
2) it would add a lot to list the actual immunosuppressant drugs for #3 and show in brackets any incidence of PML in their history

Scoby

7/17/2005 02:51:00 PM  
Anonymous Anonymous said...

I WAS AT THE ELAN AGM AND YES IT WAS VERY UPBEAT.I ASKED THE QUESTION RE BREAKEVEN EBIDTA AND WAS ASSURED BY sHANE COOKE THIS WAS STILL ON.THE NCB REPORT GIVES ME GREAT CONFIDENCE AND THE SOTP VALUATION MEANS A LIMITED RISK.

OKMICK

7/17/2005 03:02:00 PM  
Anonymous Elnbigmoe said...

John, you refered neuro11111 as a good source for further reading. Neuro11111 is a short/basher. I think you meant neuro1111, who is a great source....Super post...THANKS.

7/17/2005 03:15:00 PM  
Blogger jwu said...

thanks for pointing out the mistakes i made. esp you elnbigmoe, i would have created a lot of new short sellers if i had referred them to neuro11111. good eye.

just an update on what im doing right now. a lot of analysts have reduced their projections on the # of patients what will use tysabri "when" the drug is back. right now im trying to pull the numbers and see how they add up, and to see if their projections are realistic.

if anyone can point me in the right direction, that would help me alot.


also, is the white text on black background really that hard to read? i personally find it to be a lot more relaxing on the eye than black text on white bckgrnd.

7/17/2005 03:28:00 PM  
Anonymous Anonymous said...

As an employee it is great to see some measured opinion on the company and its future. With regards to Yahoo there are some serious loons on the ELN message board and they should be reported

7/27/2005 02:47:00 PM  
Blogger The Patient Connection said...

The Patient Connection would like to take this opportunity to invite you to participate in a new blog on Multiple Sclerosis. It would be great if you could do so as it will help us plan research into Multiple Sclerosis over the next few months.

http://www.thepatientconnections.com/blog.asp?uid=15l


What it is:

The purpose of this blog is to help The Patient Connection find out more about living with Multiple Sclerosis and how it is treated, its effect on home and the environment.

Also, you may be aware that in the United Kingdom NICE, the Government's drug watchdog, has recommended against the prescription of one of the most effective drugs so far developed to treat Multiple Sclerosis. NICE has advised that the efficacy of Tysabri is not proven or that the cost is simply too high.
"In clinical trials, Tysabri has shown a significant reduction in relapse rates and a reduction in the risk of disability progression.”
What does this mean? People with MS could face the prospect of an improved quality of life, would have the chance of staying in work and be independent and not rely on State benefits –
Simon Gillespie said: "The UK is now alone in rejecting this drug. More than 10,000 people with MS in Ireland, Germany, the USA and elsewhere are already benefiting. But NICE has decided people with aggressive MS in the UK are simply not worth it."
What are your thoughts? How are you currently treated? Are you fortunate enough to have been prescribed this drug? Do you have to go abroad for your prescription and treatment? How are you currently treated? Have you changed your lifestyle? Do you get the right support from the State, employers, friends, family?

If you wish to participate in market research now or in the future you can join our research community The Patients’ Voice here

http://www.thepatientconnections.com/patients-voice/index.html


If you have any more questions please feel free to get in touch with me on Belinda.shale@thepatientconnections.com

Thanks for your help

Belinda
The Patient Connection

4/01/2007 08:03:00 AM  

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