Elan, Biogen Idec Won't Gain Much from Tysabri Approval

[See article correction.] The roller-coaster ride that the drug Tysabri has been on over the past several years hit another high this week as the FDA approved it to treat Crohn's Disease [CD]. But this approval doesn't necessarily mean the roller-coaster ride will end for the drug, which is co-marketed by Elan (ELN) and Biogen Idec (BIIB) and also is approved to treat multiple sclerosis [MS].

Tysabri was originally approved for MS in 2004, but was pulled from the market in 2005 after two patients died after contracting PML. The FDA allowed the drug to return to the market in 2006 with a risk-management plan, and there have been no complications with PML since. The drug will have a risk-management plan for Crohn's as well.

There are approximately 500,000 people in the U.S. with CD according to the companies, which represents a market of approximately $800 million per year. However, analysts don't expect the drug to push for significant market share in CD. Tysabri is essentially a third-line therapy for Crohn's, behind Schering-Plough's (SGP) Remicade and Abbott's (ABT) Humira. Concerns about safety and the fact that the EU rejected its approval for CD in November will limit the drug's sales in my view.

One analyst says that Tysabri could reach $182 million in peak sales for CD alone by 2013. Other estimates have the drug reaching $40 million by 2010. Total sales estimates for Tysabri, including both MS and CD, range from $400 million to $670 million by 2010.

The addition of Crohn's to Tysabri's approval list shouldn't do much for either stock, in my view. Biogen's stock didn't react much to the news, trading up only 1% on the the day of the approval. Elan has more to gain from Crohn's since about 37% of its sales came from Tysabri in the third quarter 2007. But, investors didn't push the stock up any with the approval. I'm not overwhelmed either. Tysabri has been shown to be a high-risk drug and it isn't going to grab the market share in Crohn's to help these companies too much. Tysabri is not a good enough reason to invest in either Biogen or Elan. However, both do have other products and good pipelines that might be worth taking a look at if you are interested in these two firms.

Disclosure: I do not have positions in any of the stocks mentioned.

Comments

[Dr_Dave]

Brett,
You importantly failed to mention both cases of PML actually occurred in combo patients. The MS patient was receiving both Tysabri and Avonex, while the crohns patient was also prescribed with Remicade (a drug which actually causes PML). If you check the FDA site you will actually see that the remicade drug is listed as the primary suspect in this patient.

Tysabri has been much maligned due to ill-informed or partial representation of the true facts behind the drug. With almost 25,000 patients now receiving the drug and NO CASES OF PML, I certainly won't be surprised to see it continuing to confound analyst estimates.

By the way Elan has perhaps the most exciting drug candidate in the entire industry now in clinical trials! If that is successful you are talking a stock price which will be many multiples of todays! With an average success rate of around 70% for phase III trials, I think the risk:reward balance at these levels is amazingly good.

[Grayray]

Brett,

Dr_Dave has done an excellent job in explaing the issues of PML. Unfortunately, you and many others are misinformed as to the issues of PML.

Hopefully others who are doing research will check deeper into the PML issues and thereby stop basing there economic theories on false information.

Time will tell, but I am sure that in the near future both MS and CD patients will receive great benefits from Tysabri.

[Tibcomonkey]

Brett,

I'm sure J&J will be very concerned to learn they have lost their valuable Remicade franchise to Schering-Plough's (SGP).

Perhaps a small amount of research prior to writing would not go amiss!

[User 142431]

Perhaps with more experience you will learn to look a little deeper into your subject matter, rather than parroting questionable claims from others who failed to do their research.

Tysabri's run rate is already higher than suggested in your article. The incidence of PML in Tysabri monotherapy is exactly 0. Assuming your figure of 500,000 with Crohns is correct, this represents a potential market of $14.5 billion, not $800 million.

Let's hope your readers decide to dig a little deeper. You certainly did not.

[SeekingAlpha Reader]

Let's see, on 1/7 Biogen announced that there were 20,400 commercial patients on Tysabri (12,900 in U.S., 7,500 rest of world) as of "late December". Price of Tysabri is $29k (price increase this year) that means that Tysabri has a current run rate of $591 million a year, without Crohn's sales, and prescriptions are increasing by 300 to 400 every week.

Tysabri will easily exceed *this year* the "range from $400 million to $670 million by 2010", by a lot.

[JohnnyRoger]

Brett,

I am going to try to be charitable considering your knowledge base and obvious limited knowledge of biopharaceutial companies and market research.

You must spend more time researching your subject! J&J owns Remicade, not Schering-Plough.

The Tysabri franchise HAS suffered and it is as a result of misinformed writers who simply quote other misinformed folks and spread fear to patients and potential investors. This type of shoot from the hip medical misinformation has has done more to frighten patients from a biologic that could improve their QOL.

You know nothing about the etiology of PML. You know nothing about the pharmacokinetics of Tysabri. You're mouthing inuendo and pseudoscience you've heard from others. That's sad, very, very sad!

Tysabri has never been implicated in PML when used as monotherapy. Remicade on the other hand, has!

Even as write what I had hoped would be a charitable critique I am steaming inside at the potential harm you might have caused with your careless disreguard for the facts.

Please consider either learning to CAREFULLY research your work or perhaps confining your literary efforts to underwater basket weaving tutorials!

I do hope that you learn to temper your zeal; diligently dividing TRUTH from opinion!

John

I do have a small position in ELN

[Let us be honest]

It is sad and pathetic and infuriating that the people who affect financial markets do their research like C-grade students. I am not trying to have a personal attack at Dr. Dave (by the way, the "Dr." of what?) but I think such "experts" should have some responsibility for their writings if it may affect markets and companies that they know very very little about. Of course the markets are rarely driven by cold analysis of the facts but rather by speculation, greed, fear and rumors. However there is still no excuse to write ignorant and blatantly wrong pieces like the one above just in order to churn up the volume of these writing and justify some unreasonably high salaries of financial "analysts".....

Enbrel, Remicade and Humira are all drugs that belong to the class of TNF inhibitors. These drugs are used to treat inflammation caused by autoimmune diseases. Though Tysabri "targets" a completely different target (α4-subunit of α4β1 and α4β7 integrins) and thus has a very different mechanism of action it is also used to treat autoimmune diseases.

Doctors treat autoimmune diseases by reducing the activity of a patient's immune system that obviously makes them more susceptible to infections (viral, like PML, or bacterial) or possibly even some forms of cancer. Enbrel, Remicade, and Humira are very efficient treatments of autoimmune diseases and also generate several Billions of Dollars in sales. These therapies also are a classic story of a risk-benefit analysis. The enormous benefit of the use of TNF inhibitors has proven that the risk of the side effects due to the weakened immune system is completely justified by the improvements in the Quality of Life and the extremely low frequency of dangerous side effects. Tysabri is yet another novel and remarkably efficient autoimmune drug that has brought the relief to many many MS sufferers. When Tysabri was temporarily withdrawn from the market due to the safety concerns many patients and numerous patient-advocacy groups petitioned the FDA and BiogenIdec and Elan to bring it back to the market.

The others ahead of me already pointed out that a single therapy Tysabri was not associated with PML and I will not go there again. Those who are concerned about drug side effects and their 100% safety look at cancer drugs (no comment). Moreover, check the research that was done on Tylenol and its side effects (don't do it at night - it is too scary). My advice to those who expect to ever use drugs, "strong or week", that would have Zero side effects and the Maximum efficacy - just don't get sick since you will have left only water for your treatment(and it also should be used in moderation please). So, when you research a product or a company please do not rely on the writing of the people who have the unjustified influence on markets (albeit not for a long time) do the research yourself and check the multiple sources of the information.