The liklihood that Irish drugs firm Elan's CEO Kelly Martin's optimism that the suspended Elan/Biogen Tysabri drug for multiple sclerosis, will be back on the market soon, is diminishing.
Following a six month period when the big pharmaceutical sector has been in turmoil following the withdrawal of Merck's Vioxx pain relief drug last September, the US regulator, the FDA (Food and Drugs Administration), will proceed cautiously in its review of Tysabri.
A Sunday Times report says that Walter Atwood, an associate professor at Brown University on Rhode Island who specialises in progressive multifocal leukoencephalopathy (PML), the disease contracted by the two men, who died while participating in a clinical trial of Tysabri, said that even if it could be shown that Tysabri alone had not been responsible, it would take time to confirm this.
“Two cases out of 500 is pretty huge. Such a representative number in the order of 2-4% would be more typical in Aids patients,” he said. “The general incidence of the disease is between one in 100,000 and one in 500,000 and this is the first time PML has ever shown up in an MS patient to my knowledge.”
On Friday, US drugs company Biogen's stock on Nasdaq closed down 4.58% to $37.53 on a volume of 24,063,617 shares while its partner Irish company Elan Pharmaceuticals fell 14.14% on the New York Stock Exchange to $5.71, on a volume of 104,601,400 shares. Biogen had a market value of $12,518,206,560 at close of business Friday and Elan's market capitalization was $2,205,099,220.
Biogen Idec, the third-largest US biotechnology company, has incurred a loss of more than $10 billion in market capitalization since its close on Friday February 25th and Elan's market capitalization, has fallen more than $8 billion.
Confirmation on Thursday evening that a second patient using the Biogen/Elan multiple-sclerosis treatment, Tysabri, had died from a rare disease, dashed hopes that Monday's suspension of the Tysabri clinical trials would be temporary. Elan's CEO Kelly Martin had spoken earlier in the week of a return to market in the third quarter.
On Monday, Biogen Idec and Elan suspended trials of their intravenous therapy after one patient died from progressive multifocal leukoencephalopathy (PML) a disease of the central nervous system. The companies had said on Monday that another patient might also have the disease.
"The length of time to diagnose (PML) and the continued inability to clearly characterize the risk further reinforces our view that Tysabri is unlikely to return to the market," Richard Silver, a Lehman Brothers analyst, said in a note for clients.
Before Monday, analysts had projected Tysabri sales of $210 million for 2005, reaching a peak of $4 billion a year by 2009.
Biogen/Elan Stock Activity from Feb 24,2005
|
Biogen on Nasdaq |
Elan on the NYSE |
|
| Date |
Close/Last |
Volume |
| 03/04/2005 |
37.530 |
24,039,070 |
| 03/03/2005 |
39.330 |
21,433,010 |
| 03/02/2005 |
40.880 |
24,564,080 |
| 03/01/2005 |
41.260 |
52,534,460 |
| 02/28/2005 |
38.650 |
118,284,800 |
| 02/25/2005 |
67.280 |
1,979,777 |
| 02/24/2005 |
66.680 |
3,896,137 | Source: Edgar | |
|
| Date |
Close/Last |
Volume |
| 03/04/2005 |
5.710 |
104,582,400 |
| 03/03/2005 |
6.650 |
98,643,400 |
| 03/02/2005 |
7.940 |
47,877,100 |
| 03/01/2005 |
7.970 |
86,586,100 |
| 02/28/2005 |
8.000 |
167,068,200 |
| 02/25/2005 |
26.900 |
2,374,500 |
| 02/24/2005 |
26.910 |
1,885,600 | | |
Now even if Tysabri does return, sales likely won't exceed $700 million a year, Richard Silver of Lehman Brothers said. Analysts also said that the drug would only likely be approved for use alone and not in combination with other MS drugs. Both patients who contracted PML were also treated with Avonex, another Biogen product.
Biogen viewed Tysabri as a companion drug to its successful Avonex, which had 2004 sales of $922 million. The company saw Tysabri eventually replacing Avonex as a next-generation treatment for MS.
Elan and Biogen were to split Tysabri revenue evenly and the suspension of the drug is a bigger blow to Elan which had a 2004 loss $376 million, or 96 cents a share, on revenue of $481.7 million. Elan has three other products, Maxipime, Prialt and Azactam, on the market and receives royalties on several others.
In related news, proceedings by the ousted CEO of Elan, Donal Geaney will begin in the Irish Commercial Court, on April 11th. Geaney was forced to resign in 2002 following allegations of accounting fraud and a collapse in the stock price, which coincided with adverse clinical trial results on a key drug for Alzheimer's disease.
Geaney is claiming Elan has denied him share options entitlements, which could exceed $12 million (€9 million). He says that he was given a remuneration package in November 1989 which included share options. Following his removal from office in 2002, it is claimed that he had a phone conversation with a board director and also the chairman Dr Garo Armen, who confirmed he would be treated in the same manner as other senior executives who had left or would be leaving the company.
Geaney claims that he was accordingly entitled to have 24 months from the date of termination of his employment in which to exercise his share options and that Elan wrongfully and in breach of agreed terms purportedly asserted that he was not entitled to exercise the share options held by him. Elan says that Geaney's primary concern at the time of his departure was to be given as long a period as possible to allow the share price an opportunity to recover, so his share or stock options would have some value.
To that end, Elan claims, Geaney was granted a new two-year employment contract with the relationship being severed at the end of that contract.
At the time, it was stated that Geaney who made about $10 million from Elan in 2001, would be retained as a consultant to advise on the issues related to the accounting fraud allegations, which had been raised by the Securities and Exchange Commission (SEC).
In another legal development, in the US yesterday, Johnson & Perkinson ("J&P") announced that it is commencing in the US District Court for the District of Massachusetts a class action on behalf of purchasers of Elan Corp., plc ("Elan") securities during the period between February 18, 2004 and February 25, 2005 (the "Class Period").
The complaint charges Elan and certain of its officers with violations of the Securities Exchange Act of 1934. Elan is engaged in the development and commercialization of Tysabri, a vaccine designed to treat patients with multiple sclerosis (MS), slowing the progression of the disease and reducing incidents of relapses. Throughout the Class Period, defendants caused Elan to make a number of positive statements about the status of its clinical trials and the commercial potential of Tysabri, causing Elan's stock to trade at artificially inflated prices. The Complaint alleges that Elan violated federal securities laws by issuing false or misleading information. Specifically, defendants failed to disclose and misrepresented the following material adverse facts: (i) that Tysabri (natalizumab), a monoclonal antibody for the treatment of Multiple Sclerosis ("MS"), posed serious immune-system side effects; (ii) that Tysabri, like other MS drugs, made patients susceptible to progressive multifocal leukoencephalopathy ("PML") by changing the way certain white blood cells function, thereby allowing PML, a normally dormant virus, to run rampant within the human body; (iii) that defendants knew and/or recklessly disregarded documented facts that MS drugs can cause greater incidents of PML to occur; and (iv) that defendants concealed these facts in order to fast track Tysabri for FDA approval so that they could reap the financial benefits from the sales of the drug.
The claim says: On February 28, 2005, Elan shocked the market by reporting that they were withdrawing Tysabri from the market following reports of patients contracting PML, with at least one instance resulting in death. The announcement caused Elan's shares to plummet, declining over 70% to approximately $8 per share on February 28, 2005.
Another ambulance-chasing law firm, Dyer & Shuman, LLP in an advertisement, encouraged persons who purchased the common stock of Biogen Idec Inc. between February 18, 2004 and February 25, 2005 ("Class Members") to contact it concerning their rights and interests as potential class members in the shareholder class action recently filed in the United States District Court for the District of Massachusetts against Biogen Idec Inc. and certain of its officers and directors.
