Elan down 9% as partners pull out

Elan suffered a near 9% fall in its share price yesterday after news that its partners have ceased plans for their headline Alzheimer’s disease treatment.

A second failed Phase 3 trial result in as many weeks for Bapineuzumab — the drug first developed by Elan but latterly developed and mostly owned by Pfizer and Johnson & Johnson — has led its owners to abandon further tests; a major setback to their hopes of becoming the first consortium to find a breakthrough for combating dementia and slowing its onset.

Johnson & Johnson alone is set to incur a $300m (€240m) to $400m charge in its third-quarter results, reflecting the writedown of in-process R&D work.

The latest result meant that the first two of four scheduled final stage trials of the drug failed to improve symptoms among patients. Dublin-based Elan still held a 25% stake in the Alzheimer’s division.

Analysts noted yesterday that the investment rationale behind Elan is now firmly focused on its successful multiple sclerosis treatment, Tysabri; but also stressed the disappointment — in yesterday’s news — for patients, investors and the wider Alzheimer’s research community alike.

Last month, Elan reported an 11.2% year-on-year increase in first-half revenues to €474m, and a $14m lowering in net losses. Those numbers were driven by solid growth of Tysabri, which saw like-for-like sales growth of 8% and enjoyed its fastest quarterly customer addition rate in three years.

“Elan management has responded rapidly to adversity in the past; it is unlikely to be different this time around,” Davy Stockbrokers’ Jack Gorman said yesterday. “What is different in this instance is the quality of the Tysabri asset, the cash that it generates for Elan and the existing net cash position on the balance sheet. These factors provide support in what will likely be a volatile day for the stock price.”

Elan took an initial 12% hit in Dublin before recovering slightly to end the day down 8.74% at €8.43.

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