Elan Shares Drop After Alzheimer’s Drug Development Halted

Elan Corp. (ELN) fell to the lowest price since December in Dublin trading after the company’s partners ended most plans to develop an Alzheimer’s drug following a second failure in a clinical trial.

Elan will take a charge of $117.3 million this quarter, writing down to zero the value of its venture with Johnson & Johnson (JNJ) to develop the drug, bapineuzumab, the Dublin-based company said in a statement yesterday. Now that J&J and Pfizer Inc. are ending most work on the treatment, Elan will have “a significant reduction in spending” through the end of 2013, the company said.

The apparent end of bapineuzumab may mean Elan considers selling itself, said Michael Yee, an analyst at RBC Capital Markets. Bapineuzumab, designed to attack the brain plaques that serve as a hallmark of Alzheimer’s, failed to improve symptoms of dementia in the second of four final-stage trials of the drug, Pfizer and J&J said yesterday in statements.

“This is clearly disappointing for both investors and the research field,” Corey Davis, an analyst at Jefferies & Co. in New York, wrote in a report.

Elan fell 8.7 percent 8.43 euros at the close of trading in Dublin, the lowest price since Dec. 2, giving the company a market value of 4.99 billion euros ($6.2 billion). The stock has declined 21 percent this year, compared with a 12 percent increase for the Bloomberg Europe Pharmaceutical Index.

Tysabri Focus

“We are tremendously disappointed for patients and their caregivers who are suffering from Alzheimer’s and our employees who have dedicated many years to advancing this technology with the goal of creating a meaningful therapy to combat this challenging disease,” Elan Chief Executive Officer Kelly Martin said in the statement.

Elan will focus on Tysabri, the multiple-sclerosis drug it markets with Biogen Idec Inc., keeping costs down and strengthening the company financially, he said.

Elan may consider selling itself, possibly to Biogen, because the company doesn’t have a permanent CEO, and because it’s shown in the past it’s willing to consider a deal, Yee wrote in a report to clients. Martin had planned to step down by May 1 this year, but the board asked him to stay until the trial results were published. The company in 2009 hired Citigroup Inc. to help it review strategic options.

Buying Elan would give Biogen full ownership of Tysabri and would add to the Weston, Massachusetts-based company’s earnings, Yee wrote.

Eli Lilly

In addition to focusing on revenue growth through Tysabri, Elan will work to strengthen its balance sheet and capital structure while reducing overall financial risk, said Jonathan Birt, a spokesman for the company at FTI Consulting. He declined to comment on the possibility of a sale.

“At the present time, there is no discussion about changing the CEO of Elan,” Birt said.

In the Pfizer-J&J trial, bapineuzumab didn’t help patients who don’t have a gene called ApoE4 that boosts the risk of getting the disease. New York-based Pfizer (PFE) announced on July 23 that a final-stage study of the product failed in patients with the ApoE4 gene.

Until the bapineuzumab trials were stopped, Pfizer, Elan and J&J were competing with Indianapolis-based Eli Lilly & Co. (LLY) to create the first therapy to target a cause for Alzheimer’s, rather than just its symptoms. Trial results for the Lilly therapy, solanezumab, are due soon.

“It would be very surprising at this point if Lilly’s solanezumab is successful,” Jefferies’ Davis wrote. “And if we’re right, we are still many, many years away from any new approved drug for Alzheimer’s patients, unfortunately.”

To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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