Disaster du Jour

Elan Pharmaceuticals, (ELN – US ADR)

This seems to happen to Elan every couple of years — a review board (or in the earlier case, their US partner with a less efficient competing drug) decides the PML infection risk might be too high with their Tysabri.

I first shared my opinion with online friends about the potential for this new type of drug back when it got crushed from $30 to $3 virtually overnight back then (February 2005). It’s been back up to the $30’s since then, and today’s news out of the UK (where they weren’t testing for PML) has it down to $5, where I’m buying.

Warning: I have a reverse magic touch on stocks. Invest at your own risk. This is NOT investing advice. Check with your own advisors. Not suitable for conservative investors. Your mileage may vary.

My friend with Multiple Sclerosis (MS) was in line to take Elan’s Tysabri right before they removed it from the US market in early 2005. She is fully aware of the risk, and she now has to take an MRI every three months to see if a PML infection is starting as a condition for receiving the treatment.

Second warning: As proof of my reverse magic touch, I had helped my friend research Tysabri before she was first supposed to get it. As a result, I owned some very expensive shares when the stock got crushed in 2005.

During the 18 months she couldn’t get Tysabri, her disease progressed from where she had a slight limp to needing a cane to walk at all. She was the first person east of the Mississippi to get on the drug when it came back. It has slowed her disease quite a bit over these past few years.

She holds a good job and raises two kids on her own. She would not be able to do that without the drug. It will give her 20 years of acceptable quality life vs. the 10 years or less that other treatments offer. Taking a 1000-1 risk of getting a nasty infection, the majority of which are caught and cured, is a risk she will happily take.

In fact, if she were to get PML, my guess is that the worst thing, from her viewpoint, will be to go onto one of the other MS treatments like Biogen Idec’s Avonex until she can take Tysabri again. Basically, she knows she will deteriorate on other drugs.

These patients don’t care what the warning label says. It’s an easy decision for them, given the fact that they have a fatal disease. 10 years or less with near certainty of a painful death preceded by wheelchair disability, compared with a tiny risk and 20 years or more being able to live on your own. Which would you choose?

So, unless the Europeans or the UK does something stupid like take the drug off the market, I think sales will continue to grow. The MRI clinics over there will just get more business, IMO. I’m loading the boat, and writing $5 and $6 calls for November, December and January to allow the market to bring my position back down to normal full position levels.

If the stock has further to fall before January expiration, then I’ll re-evaluate at that time.

I almost forgot. Elan is also in human trials for a potential Alzheimer’s treatment. If that works, they’ll have the Holy Grail of pharmaceuticals – an expensive drug millions of people will need for the rest of their lives.


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