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Originally posted by noshadyldy
Anyway, that's just my 2 cents...
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IMO, the reason is that ELN was priced for approval of Antegren/Tysabri already. Much of the run up from sub-10 to 30 was the expectation of this approval, and if it hadn't happened, ELN would likely be back under 10 right now. The next move up for ELN would have to be on good earnings from the drug (better than expected). Of course the move could come just as easily before the earnings are out, if speculation that earnings are good drives the stock price up.
Anyway, that's just my 2 cents... -
Jiesen, when the final data is released in Jan. or April, the patients will DEMAND the drug form their Docs. when the main stream newspapers see the reports similar to this one .. it will double ... it takes time to make a fortune and i am willing to wait for it
Tysabri - A patient's story
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Business: News
Last modified Saturday, December 11, 2004 8:14 PM PST
A patient's story
By: BRADLEY J. FIKES - Staff Writer
Treating multiple sclerosis, or even diagnosing it, isn't easy. The disease can produce a variety of symptoms that can be mistaken for other conditions.
Shari Ferko, a multiple sclerosis participant in a Phase II trial of Tysabri, knows this from personal experience. She had her first symptom, a loss of sight in her left eye, in 1979. But she wasn't diagnosed with multiple sclerosis until 1990.
To treat her vision loss, Ferko was given the drug prednisone, and her vision temporarily improved.
"In 1984, I had another bout with my vision problem and numbness with my left leg," said Ferko, who was living in Tennessee at the time. "The doctor said I probably had a pinched nerve, but it never went away."
During the rest of the decade, Ferko's balance and coordination deteriorated, making walking difficult, and she experienced problems with bladder and bowel control. She began to fatigue easily.
As the symptoms worsened, Ferko was forced out of jobs, including one as a hospital nurse, and later at a medical clinic.
Ferko continued her prednisone treatments during the early 1990s, until they were no longer effective. Her prognosis was bleak.
"I was told I would be using a cane in two years, a wheelchair in five years and be dead in 10 years," Ferko said. "My kids were 7 and 8. I wouldn't see them graduate from high school, go on to college or have kids of their own."
Things changed for the better after Ferko moved to Dallas. She contacted the Dallas chapter of the National Multiple Sclerosis society. In 1998 she found J. Theodore Phillips, a neurologist who had developed expertise in multiple sclerosis since the early 1980s.
"It was just like night and day. He knew all about MS," Ferko said.
Phillips suggested she join a Phase II study of Tysabri. In the double-blinded study, neither patients nor physicians knew who was getting the drug or a placebo. Later, she was placed in an "open label" study where both Phillips and Ferko know she is getting the drug.
Today, Ferko's health has stabilized. She works today at a desk job as a legal nurse consultant.
"I did live to see my daughter graduate from college. I did live to see my son's first child born, and I get to baby-sit, so that works out really well," Ferko said "Ö If this is the kind of life I can have, I'm really happy."
Ferko advises those diagnosed with multiple sclerosis to make finding a knowledgeable doctor their highest priority.
"This is not the death sentence that it was 20 years ago. You can live a full life, but it's important to get involved with a physician that knows MS," she said.
The San Diego chapter of the National Multiple Sclerosis Society can be contacted on the Web at (www.mssd.org) or by phone at (85
974-8640.
Editions of the North County Times Serving San Diego and Riverside Counties
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TO UNDERSTAND ELAN ... THIS ARTICLE IS A MUST READ
From idea to product to patient: the story of a clinical trial
By: BRADLEY J. FIKES - Staff Writer
It was the afternoon of Nov. 23, and the fax still hadn't arrived at the headquarters of Biogen Idec in Cambridge, Mass. Al Sandrock, Biogen Idec's vice president of medical research, was increasingly anxious. The fax, due from the U.S. Food and Drug Administration, would confirm that Tysabri, its new drug to treat multiple sclerosis, had been approved. Approval would mean hundreds of millions of dollars in sales to Biogen Idec and its partner, the Irish drug company Elan Pharmaceuticals ---- and new hope to multiple sclerosis patients.
"I pretended I had business in the area of the fax machine," Sanrock said. "I heard a little yelp of excitement. It turned out the fax was just coming through. People were bringing in cases of champagne, some speeches were made. There was a lot of champagne drinking, slapping on the back."
That fax from the FDA, transmitted in minutes, was more than a decade in the making.
Solving a medical mystery
Multiple sclerosis, or MS, has long been an extremely frustrating disease, for both patients and doctors.
"A handful of treatments are on the market, yet in the absence of a cure, the treatments that have been available have been only partially to moderately effective," said Dallas neurologist J. Theodore Phillips, who has specialized in MS since 1984. Phillips has participated in Tysabri's clinical trials for about eight years.
Multiple sclerosis is a disease of the central nervous system. Magnetic resonance imaging (MRI) scans of patients' brains show lesions in a section called the white matter. But what produces those lesions was a mystery.
MS symptoms include limb numbness, dizziness and trouble walking. Patients experience periods of disability followed by remissions and relapses. Symptoms tend to get worse over time, and can lead to total incapacitation or death.
In the 1980s and early '90s, researchers deduced that multiple sclerosis is a so-called "autoimmune" disease, caused by an attack by a certain type of white blood cell on the central nervous system. This produces inflammation and the brain lesions seen on MRI scans.
With a possible cause to work with, researchers began thinking of a treatment. In the early 1990s, a South San Francisco biotechnology company called Athena Neurosciences, began testing a drug based on that theory. The drug, called Antegren, was named Tysabri after the FDA approval.
Athena didn't survive to see Tysabri's success. In 1996, Athena was purchased by Elan, which continued clinical development of the drug. Biogen entered the picture in 2000, signing an agreement with Elan to help develop and produce Tysabri. Biogen merged in 2003 with San Diego's Idec Pharmaceuticals, creating Biogen Idec.
The science behind Tysabri
To stop the autoimmune attack, Athena scientists harnessed another part of the immune system, large protein molecules called antibodies. They designed an antibody that latched onto these white blood cells, stopping their assault.
This particular kind of antibody, called a "monoclonal antibody," is made by copying, or in scientific jargon, "cloning" a human gene, in this case a gene for making the antibody. This cloned gene is inserted it into "immortalized" animal cells, usually from a cancer. The cells reproduce endlessly when given the right nutrients, secreting the monoclonal antibody in the process.
Tysabri is made from genetically engineered mouse cells taken from a white blood cell cancer called myleoma. It was given the scientific name natalizumab. (The suffix -mab indicates it is a monoclonal antibody.)
Phillips said he took part in Athena's trials because he liked the idea of testing a drug crafted by basic medical research. He began recruiting patients to test Tysabri, which is given by intravenous infusion in a clinic once a month.
"Until we have a cure, there will be a continuous need to have something better and better and better until we get to a cure," he said. "As time goes forward, as we understand MS more, I think we'll get to the point where we'll achieve a tight control of the disease, if not ultimately a cure. This (Tysabri) is a major step in that direction."
A costly, lengthy maze
There was no guarantee of success when Tysabri entered the three-phase clinical trial process. The opposite was closer to the truth. Drugs that enter Phase 1 testing have only an 8 percent chance finishing Phase 3 trials and reaching the market, according to the FDA.
Biogen Idec declined to provide a cost estimate for Tysabri's development. However, the Tufts Center for the Study of Drug Development at Tufts University in Boston estimates the average total cost of developing a new drug at $848 million, as measured in 2003 dollars.
Tysabri is now being manufactured now in a 90,000 liter-capacity Biogen Idec plant in North Carolina. Late next year, another 90,000-liter plant being constructed in Oceanside is scheduled to begin preliminary production. The plant cost $380 million, and when fully built out is expected to cost $1.3 billion. It must be inspected by the FDA before commercial production can begin.
Biogen Idec expects the Oceanside plant to be making test patches of Tysabri by the early fall of 2005. Full licensing by the FDA is expected by 2006.
"We submit a dossier of information to the FDA before the inspection," said David Broad, general manager of Biogen Idec's Oceanside plant and the company's West Coast vice president of manufacturing. "It takes a minimum of four months for the FDA to review that information, inspect the plant, and approve us."
Progress
Anticipating success as the trials progressed, Biogen Idec designed the trials to allow an early peek of results of the Phase 3 study. After about one year, the FDA would "unblind" the results," Phillips said, and look at the data. The FDA had agreed before the Phase III trials began that the agency would consider early approval if the results were compelling.
The results were dramatic. Brain lesions were reduced by 90 percent. Moreover, Tysabri-treated patients had fewer relapses than existing treatments, including Biogen Idec's own MS drug, Avonex. Those treatments reduced relapses by 33 percent, while Tysabri reduced them by 66 percent.
The early Phase III results were so impressive that Biogen Idec decided to file for early approval. The company submitted its application electronically, in a cartridge containing Fujufilm DLT Tape. The cartridge was 4 inches square and 1 inch thick, hand-carried by company employees to the FDA.
In the days before electronic submissions, companies frequently delivered the applications on trucks, because the paperwork was so massive.
Patient support
The involvement of patients is critical to successful clinical trials. They must take the medications, report symptoms and observe strict conditions to make sure the information gathered is valid.
One of the most challenging conditions is that the Tysabri trials were "double-blinded," meaning that neither doctors nor patients knew if they were getting the drug or a placebo.
Patients with a deadly disease might be expected to chafe under such a condition. But Phillips said their reaction was "just the opposite."
"They feel, very correctly, that they are contributing to the next generation of medication," Phillips said. "If it weren't for these people, we would never have anything new."
To Phillips, one of the most meaningful parts of the Tysabri trial is what may come after, as this and other drugs are tested on other autoimmune diseases such as Crohn's disease and rheumatoid arthritis.
"It's a happy happenstance that the first disease studied with the new approach happened to be MS, and that we had such a resounding positive result," Phillips said. "It opens the gateway for other autoimmune diseases to be studied with this same conceptual base."
Accomplishment
All of the work by Athena/Elan/Biogen Idec, the years of clinical testing, came down to that fax sent in the late afternoon of Nov. 23, producing the cheering, speeches, champagne toasts and back-slapping that followed.
Sandrock, a former academic researcher, described his own reaction as more internal: a sense of accomplishing something that would improve lives.
"I used to celebrate when we got a paper accepted or a grant renewed," Sandrock said. "This time, I saw a picture of the actual vial with the name Tysabri. It's something tangible. It treats a real problem. . . It was a feeling I'd never experienced before in my professional life."
Contact staff writer Bradley J. Fikes at bfikes@nctimes.com or (760) 739-6641.
Previous Story:Comment
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King,
I'm a believer.
billyjoeComment
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kingofthehill,
With all the bad press hurting MRK PFE and others it would seem that ELN will be a slam dunk . The big question is when. Just hope there are no surprises or skeletons in the pillbox. PFE hasn't pulled Celebrex yet and the story will keep building until they do. It's kind of sad , but my 83 year old mother had to stop taking her Vioxx so I gave her some Celebrex that didn't work for me. Now she has lots of aches and pains , but thankfully didn't have any bad reactions.
billyjoeComment
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yes, I agree.
I saw PFE down at 23 this morning and was _this_ close to scooping up some shares from the weak longs in their moment of panic. I hesitated and missed the chance though, but it's probably just as well... once they do announce they're pulling Celebrex and/or Bextra, we'll see 23 again, and probably even lower, though there's really no reason for PFE to be this low. If they're found to be at fault for every side effect of every drug they sell, pretty soon most of the pharmaceutical companies would have to close up shop. I don't think our county can afford that or would allow it to happen.
PFE is the world leader in the business and will not go down in flames over this.Comment
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Larry Feinberg, Oracle Partners
Larry Feinberg knows healthcare, having covered it as an analyst for nine years and having spent 16 years running long-short healthcare hedge funds.
Knee-jerk healthcare funds should sit up and take note: “For a long time, the smartest thing for healthcare investors was always to be long. Not any more,†Mr Feinberg says. “The dichotomy between winners and losers has never been greater and there will be haves and have-nots in 2005 and 2006.â€
The key shift, Mr Feinberg says, is the move to consumer-directed healthcare, which will cause higher co-pays and deductibles. With soaring costs coming under pressure from the government and individual healthcare consumers, “healthcare is no longer a blank cheque bookâ€.
In Mr Feinberg's view, the haves are the companies that offer “must-have productsâ€, while the have-nots are the pharmaceutical companies loaded with “me-too productsâ€, for example, the six or seven different cholesterol drugs.
The good news is that the huge investment in biotech looks poised to explode, the bad news that the explosion of new drugs looks to be two or three years off. Mr Feinberg's fund is long “a few pharmaceuticals with must-have drugs, such as Novartis†and Bayer and “short everybody elseâ€.
For 2005, Mr Feinberg is extremely bullish on Elan, the Irish biotech company that, with partner Biogen Idec, recently won approval for its Tysabri multiple sclerosis drug. “This is my candidate for the biggest drug of all time,†explains Mr Feinberg, saying Tysabri is at least twice as good as any other MS drug.
my price target on ELN is $40.00-45.00 in 2005 ... KINGComment
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i dont like to edit my post.. the above is from the
The Financial Times Ltd 2004.
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King,
When do you believe the move will start? What month will the drug hit the market?
billyjoeComment
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I like April options and July if thats what you are asking, the EDSS scores will be out at the earlist next month or April the latest.. these test scores will cause a run on the drug and the company will announce that they are sold out ...
here is a report from the 12/21/04 wall street journal
HEARD IN EUROPE
As Drug Titans Falter,
Midsize Rivals Gain
Cost Cuts, Narrower Focus
Help Smaller Competitors
Like Schering, Elan, Shire
By JEANNE WHALEN
Staff Reporter of THE WALL STREET JOURNAL
December 22, 2004
LONDON -- While big pharmaceutical companies on both sides of the Atlantic suffer product failures and a dearth of innovation, a clutch of midsize drug makers has quietly been seeing better fortune.
Thanks to cost-cutting programs and a narrow focus on a few therapeutic areas, companies such as Ireland's Elan Corp., Schering AG of Germany and Shire Pharmaceuticals Group PLC of the U.K. have been bringing new products to market and enjoying some of their best financial results in years.
Not long ago, critics thought these midsize drug makers would get squeezed out of business as the rest of the industry consolidated into a handful of titans with huge research budgets and sales forces.
They have been proved wrong, at least so far. Instead of trying to compete head to head with the likes of Pfizer Inc. or GlaxoSmithKline PLC, midsize companies are mostly concentrating on diseases too small for their bigger rivals to target. Often, that means less competition, less price pressure and better treatment from regulators such as the U.S. Food and Drug Administration, which tend to approve drugs for underserved disease areas more quickly.
"We look at areas big pharma isn't in, where there's high need," says Matt Emmens, chief executive of Shire, which sells Adderall XR, the leading medicine for attention-deficit/hyperactivity disorder and has just won FDA approval for a new drug for kidney failure.
To be sure, the picture with midsize companies is mixed. Some are performing poorly, and others are only beginning to turn around poor sales and profit figures. But at the best-performing companies, revenues are growing in the double digits and profit margins are widening. That compares with a profit squeeze at many big pharmaceutical companies, which have been under pressure to cut their drug prices and spend more on development of new medicines.
And while Merck & Co., Pfizer and AstraZeneca PLC face sharp criticism about the safety of their drugs, some of the most successful product launches in recent months have come from midsize producers, such as multiple sclerosis treatment Tysabri, developed by Elan and Biogen Idec Inc. of Cambridge, Massachusetts.
Investors seem to be taking note. While overall pharmaceutical stocks have fallen by about 8% over the past three months, based on Morgan Stanley data. Schering has risen by 13% and Shire by 4%. Elan, meanwhile, has soared 36% year-to-date thanks to the Tysabri approval, as well as anticipation of it. Elan's shares ended yesterday in Irish trading at €19.30 ($25.84), off 30 European cents. Schering's shares closed in Frankfurt at €55, off 29 cents. In London, Shire ended at £5.39 ($10.50 or €7.84), up six pence.
For many midsize drug makers, surviving has meant scaling down their grander ambitions of the past. Ten years ago, Schering was a classic German conglomerate, making fertilizers as well as pills. But in recent years it has sold a number of businesses, laid off thousands of employees and narrowed its drug development to four therapeutic areas.
With its new strategy in place, Schering aims to double sales in the crucial U.S. market to $2 billion (€1.49 billion) by 2006. To strengthen its lead in oral contraceptives, Schering last year launched consumer advertising for its birth-control pill Yasmin, helping double the product's sales and make it the top-selling oral contraceptive in the U.S. The company is also in the early stages of researching contraceptives for men.
Beyond birth control, Schering is hoping for FDA approval next month of a new treatment for bone metastases in breast-cancer patients, and longer term, for a new cancer drug in development with Novartis AG.
A cost-cutting program is also beginning to boost Schering's historically low operating profit margin, which will grow to about 15% this year from 14% last year. Schering aims to raise it to 18% by 2006.
Elan, too, is boosting its financial performance by narrowing its ambitions. The company nearly collapsed in 2002 after an accounting scandal, failed drug trials and bad acquisitions. Under new management Elan has sold off a number of businesses and focused on drugs to treat nervous-system disorders, autoimmune diseases and chronic pain. In addition to its recent success getting Tysabri approved for sale, Elan is hoping for FDA approval in the coming weeks for Prialt, a medicine for the kind of severe pain suffered by cancer and HIV patients.
Being smaller makes Elan more scientifically innovative, and better able to change course when things go wrong, says Elan Chief Executive Kelly Martin. Midsize pharmaceutical chiefs say their salespeople also have an easier time building relationships with doctors, since they sell only to a few specialists and not to general practitioners.
Some analysts sound a note of caution about midsize investments, saying they can be more easily hit by a product failure or another setback than their bigger rivals. "The advantage of midcap companies is also the disadvantage -- one drug can totally transform the picture," says Denise Anderson, a pharmaceutical analyst at Kepler Equities in Zurich.
That is certainly true at Shire. Sales are booming, thanks to the growing market for treating ADHD, but some investors are worried that could come to a halt when the company's patent for Adderall XR runs out in 2007. "Sales and earnings are growing double digits ... [but] it's not a stock we have big exposure to because of the uncertainties," says John Wilson, an investment director at investment fund firm Standard Life of Edinburgh, Scotland. Shire's Mr. Emmens says the company has enough new products in development to keep growing.
Write to Jeanne Whalen at jeanne.whalen@wsj.com1Comment
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DECEMBER 23, 2004
LAB REPORT
By Catherine Arnst
A New Painkiller's Painful Path
In 1998, Irish pharma Elan bought an entire company to get its hands on a revolutionary drug. Now the FDA is finally poised to rule on it
Pain treatment is very much in the news lately, with reports that Merck's (MRK ) Vioxx, Pfizer's (PFE ) Celebrex, and now Bayer's (BAY ) Aleve may all increase the risk of heart attacks. It's ironic that Celebrex and Vioxx were originally developed to remove the risk of bleeding ulcers associated with ibuprofen, aspirin, and other over-the-counter pain medications. That both turned out to have their own worrisome side effects demonstrates how extremely difficult it is to develop new pain treatments. Given that some 50 million Americans are partially or totally disabled by chronic pain, the need couldn't be more dire.
Right now, almost all painkillers fall into two categories: aspirin and other nonsteroidal anti-inflammatories such as Aleve, and the so-called Cox-2 inhibitors that include Vioxx and Celebrex, all block pain-causing Cox enzymes that flood the body when a joint or muscle is inflamed. For very severe pain there are the opioids, such as morphine, codeine, and Oxycontin, which can cause extreme drowsiness and are open to being abused. There has been some success treating pain with antidepressants and epilepsy drugs, but their record is spotty. Consequently, drug researchers have been working for over a decade to come up with more effective treatments.
GASTROPOD JUICE. One of the first, called Prialt, is slated to receive a yea or nay from the Food & Drug Administration by the end of December. The product, made by Irish drug company Elan (ELN ), will be used only by the most severely debilitated pain victims, who have found no relief with morphine. Still, it's a breakthrough drug, and particularly interesting because of its source -- the poisonous venom of the tiny cone snail.
Prialt is also a cautionary tale of how difficult it can be to develop a new pain treatment. Researchers first discovered in the early 1980s that a protein in cone-snail venom was 1,000 times more effective than morphine at relieving pain and had the added benefit of not having any addictive potential.
By the mid-1990s a tiny biotech outfit, Neurex, had come up with a drug based on that protein. Originally called Ziconotide, it's the first of a new class of analgesics known as N-type calcium channel blockers, so-called because they block the calcium channels found at the end of nerve fibers. These channels facilitate the passage of the electrical pain signal from one nerve to another and up the spinal column to the brain. If the channel is blocked, the pain signal can't reach the brain.
THREE-YEAR DELAY. Because Ziconotide is so potent, it can't be taken as a pill or even a shot. Instead, it is pumped with a surgically implanted catheter directly into the fluid surrounding the spinal cord, a delivery method known as intrathecal infusion. The drug looked so promising in initial clinical trials that Elan acquired Neurex in 1998 for $741 million in stock. Elan filed for FDA approval in 2000, but there were some major problems with the design of the clinical trials. In particular, the FDA said the data weren't sufficient to determine what the proper dosage should be, a key issue with pain drugs.
Still, the FDA considered Ziconotide promising enough to grant it an "approvable letter," meaning the chance was strong that the agency would issue a formal approval if it got the requested data. "Once we worked through all the questions with the FDA, we realized there was no other way forward than to redo" the final, Phase 3 trial, says Dr. Lars Ekman, Elan's president for research and development. And that took another three years.
Last January, Elan was finally ready to reveal those Phase 3 results. In an article in the Journal of the American Medical Assn. (JAMA), researchers reported the drug achieved statistically significant pain relief for patients with cancer and AIDS, two diseases associated with intense pain. The company changed the drug's name to Prialt and resubmitted its application to the FDA in June. It also sought approval from the European Union. An EU advisory committee recommended approval in November, raising expectations that the FDA would give the drug a green light.
"DESPERATELY NEEDED." Prialt will likely never match the blockbuster sales of Celebrex, however. Dr. Michael H. Levy, director of the pain-management center at Fox Chase Cancer Center in Philadelphia, notes that it's meant for a very small group of patients for whom morphine is no longer effective and who can tolerate the intrathecal-delivery method. "In general, that's 1 in 100 or 1 in 1,000 patients who can't get good comfort and function with existing drugs," he points out.
Still, Prialt does end the long drought of new pain treatments that take aim at novel cellular targets. "I think this medication opens people's eyes to other categories of analgesics beyond the opioids," says Dr. Allen W. Burton, associate professor of pain medicine at M.D. Anderson Cancer Center in Houston. "New drugs are desperately needed." Certainly the millions of people worried about Vioxx, Celebrex, and Aleve can attest to that.
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Arnst is a senior writer for BusinessWeek in New York
Edited by Patricia O'ConnellComment
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ELN Jan 07 options
Hello kingofthehill,
What's your opinion about Jan 07 options for ELN?
Regards,Comment
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Originally posted by stocks54
i like the $25.00 strike price less premium
ELN Elan Corp receives FDA approval for Prialt for severe chronic pain (26.40 +0.80) -- Update --
Co announced that the FDA has approved Prialt for the management of severe chronic pain in patients for whom intrathecal therapy is warranted, and who are intolerant of or refractory to other treatment, such as systemic analgesics, adjunctive therapies, or I.T. morphine. Prialt is expected to be available to physicians and patients in the U.S. in late Jan. Pricing will be published at that time. (Briefing.com note: see previous 11:34 comment for color.)Comment
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ELN Elan Corp could earn $3.50-$4.00 in EPS in the next three years - Barron's (26.50 )
Barrons highlights Elan, which has partnered with BIIB to develop a recently FDA-approved treatment for multiple sclerosis called Tysabri . The fund manager interviewed by Barrons sees awesome potential for the drug. Elan was flying high around the turn of the century -- the stock hit $65 in 2001 -- only to crash and darn near burn the very next year as its shares sank to within a hair of $1. What did the co in, and murdered its stock, was fancy accounting for its numerous joint ventures that, when uncovered by The Wall Street Journal, triggered class action suits and an SEC probe. Both were settled this past fall. Elan's roughly 50% of the profits from Tysabri, the fund manager calculates, translates into 7.5 cents a share after tax for each $100 million in the drug's sales; as volume swells, so does the impact on earnings, scaling up to 10 cents a share per $100 million. Multiply 200,000 by $23,500, which is what a year's worth of Tysabri will cost, subtract discounts and price concessions to big payors, and one comes up with $4 bln in yearly sales within the next three years, which works out to $3.50-$4.00 a share for Elan. The fund manager is looking for a double in Elan this year.Comment
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here is a copy of the full Barrons article drivig the stock move today
It was this increasingly harsh climate that prompted Larry Feinberg early last year in these columns to caution against committing your hard-earned money (or even your easily earned money, for that matter) to the big drug stocks. And how right he was. Larry runs Oracle Partners, a hedge fund specializing in just about everything to do with health care, and, last we asked, he was up 25% last year, and that's after the usual outrageous hedge fund fees. He sees no letup in the pressure on drug companies. On that score, heresy of heresies, he hazards that the Medicare legislation due to take effect next year may cause a decline -- repeat, decline -- in drug pricing for the first time ever.
The current untidy investment scene in health care is made to order, he avers, for someone who loves to play both sides of the market, as he does. For one reason or another, he thinks hospitals, drug distributors and prescription-benefit managers are destined to be among the laggards. And, while he not as bearish on the drug makers as he was -- their stocks have discounted an awful lot of the bad news -- he sees a great divide between the companies that have "me too" offerings and those that are blessed with "must have" drugs. As an example of the latter, he singles out Elan, an Irish company (ADS listed on the Big Board), of which Oracle, it may not surprise you to learn, owns a bundle.
Elan has partnered with Biogen Idec (which Larry recommended here at a much lower price and thinks still has plenty of room on the upside) to develop a recently FDA-approved treatment for multiple sclerosis -- MS -- called Tysabri (née Antegren) with, he believes, awesome potential. Elan was flying high around the turn of the century -- the stock hit 65 in '01 -- only to crash and darn near burn the very next year as its shares sank to within a hair of 1. What did the company in -- and murdered its stock -- was fancy accounting for its numerous joint ventures that, when uncovered by The Wall Street Journal, triggered class action suits and an SEC probe. Both were settled this past fall. Meanwhile, to keep afloat, the company did a corporate strip tease that saw assets shrink from $8 billion to slightly over $3 billion in a scant three years.
Its compromised past aside, Elan is not, to be frank, exactly our cup of tea. It's not earning any money and hasn't for the past few years. At first blush, anyway, finances are not a thing of beauty, although the company does boast a comforting stash of cash, the proceeds of that strip tease. The stock's already had a big run. And just about everything bullish about the company is on the come. But it does have a half interest in Tysabri and, by Larry's reckoning, that's pure gold.
He figures there are roughly 800,000 MS patients in the U.S. and Europe. Of these, 330,000-350,000 are on drug therapy and another 100,000 have had to quit therapy because of side effects or because the drugs didn't work.
Tysabri, Larry says, is twice as effective as anything now in use and has few side effects. Which is why he expects as many as a quarter of the 180,000 U.S. MS patients on drug therapy to switch to Tysabri by the end of this new year, and at least half by the end of '07. He expects Europe to give its official OK to the drug by midyear and acceptance there to follow the same pattern as in the U.S. Moreover, he anticipates something like 50,000 of the 450,000 MS sufferers here and in Europe now "untreated" to go on Tysabri, boosting the potential number of users to 200,000.
Elan 's roughly 50% of the profits from Tysabri, Larry calculates, translates into 7.5 cents a share after tax for each $100 million in the drug's sales; as volume swells, so does the impact on earnings, scaling up to 10 cents a share per $100 million. OK. Multiply 200,000 by $23,500, which is what a year's worth of Tysabri will cost, subtract discounts and price concessions to big payors, and Larry comes up with $4 billion in yearly sales within the next three years. Which, by his math, works out to $3.50-$4 a share for Elan .
Larry, we can attest, is exuberant but not irrational. The nice thing about his story is even if his estimates overshoot a bit, the numbers are still mighty impressive. We should note that the Street consensus is much more restrained in its forecasts and subdued in expectations for the stock, which is now 26 and change, up from 7 a year ago. Nothing daunted, Larry's looking for a double in Elan this year, as his vision of the company's earning power gradually gains currency and applications for Tysabri for diseases other than MS are explored.
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