Elan hit by 'disaster' withdrawal

Elan's share price is once again in tatters after the Irish company withdrew its promising multiple sclerosis treatment, Tysabri (natalizumab), from the market following the death of a patient who developed a rare nervous system disorder.

Tysabri, which was co-developed by US biotechnology firm Biogen and launched just last November, had been expected to reach peak annual sales of between $2bn and $3bn by 2007. It was tipped by analysts to be the light at the end of a long tunnel for the beleaguered firm.

However, the voluntary suspension of the drug on Monday (February 28) wiped a staggering 70 per cent off Elan's share price, reducing it to $8, as holders panic-sold their stock. Biogen shares fell 40 per cent to $38.68.

Eric Schmidt, analyst at SG Cowens, described the withdrawal as ìa disaster for both groupsî.

ìAs Elan's main product, it's obviously a blow there, and it means that Biogen has gone from a growth story to a value stock at best,î he told the Financial Times.

Shares in competitor companies in the MS market, Serono, of Switzerland, and Israel's Teva rose on the announcement.

Serono, which has seen recent competition to its top-seller Rebif arrive, is seen by analysts as the firm to benefit most from Tysabri's suspension. Rebif is seen as the drug with the strongest track record of all recent MS treatments, with eight years of efficacy and safety data.

ìThus will clearly reduce the pressure on the shares and allow Rebif to gain market share in the US more rapidly,î said Tilman Dumrese, analyst at Swiss private bank Vontobel.

Yet, both Elan and Biogen are hopeful that Tysabri will eventually re-enter the marketplace.

ìI would fully expect Tysabri will be back on the market as a meaningful product in the next three to six months,î said Elan chief executive, Kelly Martin.

However Biogen CEO, James Mullen, stressed that while the company was encouraged by positive signs from the US Food and Drug Administration that the drug would eventually be sold again, ìmany questions about riskî had to be answered first.

In addition to the patient who died, Elan and Biogen said a second patient might also be suffering from the same nervous system disorder. Both patients were involved in a trial that examined the effectiveness of Tysabri in combination with Biogen's existing MS drug, Avonex, on the market for nearly nine years.