Elan Corp.: Bounce on Goldman Positivity?

Goldman Sachs is one of the few positive firms out on Elan (ELN) this morning after the company presented Phase II Bapineuzumab data last night:

- Data clearly shows a statistically and clinically meaningful effect in APOE4 -ve patients, but with no clear dose-response due to low patient numbers. Data in APOE 4 +ve patients not as negative as previously assumed, but investors are likely to stay cautious on this until proven otherwise.

As a result of the positive data, Elan will announce its manufacturing plans (a new plant) within the next two months; in the firm's view, the capital commitment for a new plant, together with ongoing maintenance costs, as well as phase III costs, indicate the confidence in the likely outcome of the phase III program. The magnitude of the cognitive benefits in small numbers of patients is hard to argue with, in the firm's view; the effects on function less so.

Further, the data in patients who completed the full dose schedule in the study, in both APOE4 +ve and -ve patients, were clinically meaningful, as well as statistically significant. One of the aspects of the data that they believe investors have overlooked is that these results are in addition to existing Alzhemier's Disease therapies. In Goldman's view, that makes the data, albeit with its limitations, more compelling.

Implications:

The stock may weaken acutely on concerns over dose response (genuine, in firm's view) and on the deaths in the Bapineuzumab arm (irrelevant, in their view), however, as the investment thesis has not changed, their recommendation remains Conviction Buy.

Other firms:

- Piper Jaffray reiterates Sell and lowers their target to $15 from $25.

- Canaccord reiterates Sell and lowers target to $21 from $24.

- Cowen & Co. notes that with lower conviction in Phase III success for bapineuzumab and at least two years to wait for confirmation, they have trimmed their estimated bapineuzumab value by $4-5B, or $10 per ELN share, reflecting a higher discount rate. The firm remains Neutral on ELN shares.

Notablecalls: Developing Alzheimer's compounds has always been the graveyard shift. So, in that sense I'm somewhat surprised by the harsh 30% haircut in ELN's stock price following weaker than expected data. Actually, there may be a silver lining - the APOE 4 +ve patients. That's I think more than one would have normally expected from an Alzheimer's compound.

Add this to ELN's continued commitment for a new plant and you may have a nice bounce candidate here down 10 points. I would not be surprised to see the stock retrace at least part of the 10 point haircut today.

Comments

[frankie cooper:]

your post is spam. where on your site does it mention anything about goldman's positivity? besides the FIRST sentence, where else on your entire crappy site is ELN even mentioned. did a search and nothing came up...

lousy spammer.


On Jul 30 06:15 PM murphy834 wrote:

> Great overview.
> Here's a little bit more info on ELN if anyone interested in it.
> This analyst also sees it as a buy
> www.greenfaucet.com/bi...

2008 Jul 31 01:09 AM

[menopak13:]

Don't throw the baby out with the bath water! ! ! !
If you have a med which fills the need of approximately half of the known AD population - your glass is half full ! ! !
Greed and Lack of diligence have overcome compassionate need!!

2008 Jul 31 01:28 AM

[in4thelonghaul:]

Post below from the IV ELN board...think about its implications.

"apoe4 carrier status and VE, efficacy measures put differently
this is a repost with a correction

apoe4 carrier status and VE, efficacy measures put differently
been further exploring the data, and trying to get out of what I can

these snippets may be of use to people

the occurrence of vasogenic oedema was not statistically associated with carrier status (10 carriers vs 2 non-carriers, compared with 72 carrier vs 47 noncarrier treated patients, p=0.2). Therefore I reject that association. It is however, highly correlated with dose and statistically significant

for those who are concerned about efficacy I have calculated a % reduction in decline using the 0.5mg dose of completers (e4- and e4) and converted the difference to placebo scores over all doses to a % reduction estimated from performance of e4- placebo. This comparison if anything should be conservative as e4 carriers are thought to decline a bit faster and historically the e4- seemed to decline a bit worse in the bap study. it should be noted that the 0.15mg dose wasnt far off this performance.

the % reductions in decline are,
ADAScog 60%
NTB 86%
DAD 64%
CDR 54%

all quite consistent and pretty impressive and should be conservative from the point of view of placebo decline. the completer analysis is a reasonable look at how effective a drug might be in phase III.

regarding a dose response the ranking is clear across the 4 tests, again completers
0.5mg dose was best at all tests
0.15mg was 2nd best at 3 from 4 tests
1mg was 3rd or 4th ranked in all tests
2mg was 3rd or 4th ranked in 3 from 4 tests

i.e. the doses not associated with VE do better, and 0.5mg does better than 0.15mg
the best dose is 0.5mg I think this is clear. My bet is "subclincal" VE in the higher doses is the problem, or "weaknesses are strengths taken to excess"

shame about the fogginess, but its all there, and damn impressive.
how could this wall street interpretation have happened I just cant believe it! this drug is going to have incredible impact.

they have to get the paper out. I cant believe I still dont know how the placebos did overall, such a basic bit of info.

2008 Aug 04 02:54 PM