Elan: Actionable Buy Call

Leerink Swann is out defending Elan (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.

Comments

[paul b:]

If by actionable you mean in a trading, not legal, sense, then I agree and this article is an oasis of sanity in an otherwise media frenzy.

2008 Jul 30 09:34 AM

[MistaWhite:]

I got in at 21.50 this morning will a market buy order.

2008 Jul 30 10:25 AM

[bozak:]

Are you kidding? This call is an obvious attempt by someone who was already long to prop back up the stock price. The safety profile is terrible and the Phase II did not meet the primary goal. Take a look at previous small biotechs with similar phase II results (primary goal not met, no statistical significance, minority says trial is "promising") BIOM (now ONTY), INGN, VNDA, need I go on? This stock is headed below $10.

2008 Jul 30 11:14 AM

[Randy Fay:]

Thanks for the info. I might pick some up. Shoulda kept the ELN I had bought just after the Tysabri debacle (sold it for $2 gain)

2008 Jul 30 11:20 AM

[MistaWhite:]

I have a stop out at $20. I'll risk losing some for a potential gain.

2008 Jul 30 12:04 PM

[fatcat:]

I picked up some at 21 and change this morning.The ceo was on cnbc and sounded hopeful and hung over from a celebration party!We'll see..

2008 Jul 30 12:40 PM

[bozak:]

Biotechs always try to say that statistical significance is not that important and that not meeting the primary goal of the trial is not that bad. However, they fail to mention that drugs almost never get approved without statistical significance and without positive results from the trial's primary endpoint.

2008 Jul 30 04:04 PM

[bozak:]

I hope you guys actually sold at your stop loss levels. Down to $11 now in after hours.

2008 Jul 31 05:58 PM

[James Davis:]

nice call. now you know why these guys sell their 'wisdom' and don't trade it

2008 Jul 31 09:20 PM