Elan: Actionable Buy Call

Jul.30.08 | About: Elan Corporation, (ELN)

Leerink Swann is out defending Elan (NYSE:ELN) saying they are making no changes to their valuation of ELN shares and view any weakness today as a buying opportunity.

The harsh sell off in the stock that could occur today will likely be fueled by overblown expectations for the Phase II data and the difficulty in presenting a cogent analysis of a complex trial in a complex disease in a 12-minute presentation.

A MEDACorp consultant who was involved in the Phase II trial noted that data were reviewed over a two and a half hour period during an investigator's meeting night before last, speaking to the complexity of the data and the relative inability to distill it into an "elevator pitch."

To the firm, no new data emerged that causes them to revisit their thesis that bapineuzumab is effective, safe and worthy of advancing into large scale pivotal testing and could be a much-needed therapy for treating Alzheimer's Disease.

Lack of a clear dose response should not be overly surprising, especially in ApoE4 non-carriers, given that three of the four doses tested in the Phase II trial are being examined in the ongoing Phase III studies.

Although the safety profile may be understandably complex, the fact that the FDA has permitted a large Phase III trial suggests that the risk/benefit is favorable. Certain neurological anomalies may be acceptable in deference to mitigating quality of life-threatening dementia.

Lost on investors may be the fact that measures of efficacy reported from the Phase II trial that include ADAS-cog, NTB, CDR-sob, volumetric MRI and biomarkers such as phosphorylated tau are conducted by different medical professionals, e.g., psychiatrists, medical doctors, nurses, caregivers and radiologists thus enhancing the corroborative nature of the findings, they believe.

Notablecalls: Well, Leerink sure knows their stuff. I'm calling this one Actionable with ELN trading around $21 in pre-market.

Please see our earlier piece for further color.