Elan: New Multiple Sclerosis Drug Sales Will Be Key

Dec. 3.07 | About: Elan Corporation, (ELN)

I get more e-mail about Elan (NYSE:ELN) and Amgen (NASDAQ:AMGN) than any two companies.

Elan is an Irish pharmaceutical that was plagued by serious accounting scandals several years ago, and has emerged as a serious biopharma outfit with a major new multiple sclerosis drug on the market, Tysabri, jointly developed and marketed with Biogen-Idec (NASDAQ:BIIB). Elan has other partnerships to develop other CNS (central nervous system) treatments -- notably one for Alzheimer’s disease with Canadian company Transition Therapeutics (NASDAQ:TTHI). But the key to the stock in the next 6-18 months is sales growth for Tysabri.

Tysabri is easily the best-in-class MS drug. It was introduced, then pulled suddenly when two patients died and another fell ill from a rare brain disease [PML]. It was a matter of the FDA badly overreacting -- all three patients were seriously immuno-suppressed due to medications they were taking for other illnesses. The FDA finally gave the go ahead to market the drug under highly restrictive conditions.

Over time, 1-3 years, I expect the drug to prove relatively safe and gain widespread market acceptance just because it simply is a better drug, and MS patients are very knowledgeable about their disease and treatments, and Tysabri is closely monitored.

That being said, the growth in revenues will not be fast enough to satisfy Wall Street and the stock will languish and drift for too long to make it worthwhile getting in right now. Take a look at Elan in a year or 18 months when there is a clearer path for Tysabri and ELAN's Alzheimer’s drugs are closer to producing meaningful trial data.