Elan Corporation PLC ADRELN

Morningstar Rating

Stock Research and Analysis

by Karen Andersen, CFA

Elan's reputation as a leader in neuroscience research is well-deserved, as the firm has several distinct programs in clinical trials that could generate billions of dollars in revenue if data remain promising. However, side effects from the firm's Read more

Bulls Say

Elan employs some of the world's leading Alzheimer's disease researchers, and if any of its proprietary or partnered drug candidates reach the market, the firm could dominate a $5 billion global market that currently lacks any disease-slowing treatment options.

Tysabri's superior efficacy to other marketed MS drugs as well as the chronic, debilitating nature of the disease make Tysabri's benefits outweigh safety risks for many patients. Future diagnostics could help identify MS patients at low risk of developing PML, and PML treatments in clinical trials could improve outcomes for this serious side effect.

Elan is a unique blend of a profitable specialty pharmaceutical business and an innovative biotechnology firm, which recently drew Johnson & Johnson to take the reins of its Alzheimer's immunotherapy program (including lead candidate bapineuzumab) and establish an 18% equity stake in Elan. Read more

Bears Say

Despite its profitable EDT business, Elan's overall performance is heavily dependent on Tysabri; the drug accounted for 56% of Elan's revenue in 2008, and recent PML cases have investors concerned that the drug's success may be short-lived.

Although J&J's backing for Alzheimer's immunotherapy program costs should reduce Elan's cash-burn rate, it also reduces the upside Elan would see from blockbuster sales of lead drug bapineuzumab.

Elan's first promising Alzheimer's drug candidate failed in 2002 because of severe side effects, and the potentially lucrative nature of the Alzheimer's drug market stems from historically high failure rates for drugs targeting this disease.

The pace of new PML diagnoses has accelerated in recent months, and PML risk now appears to increase with duration of Tysabri therapy. Any future Tysabri restrictions--or a second market removal--could make it difficult for Elan to fund additional drug development and pay down debt. Read more

Strategy

Elan aims to use revenue from Tysabri sales and its EDT business unit to fund research and development of novel therapeutics to treat multiple sclerosis, Alzheimer's and Parkinson's diseases. The firm Read more

Management

Elan's management and board of directors have received their fair share of criticism, as egregious perks, operational inefficiencies, and lack of leadership have plagued the firm. Although some improvements have been made, we are lowering our Stewardship Read more

Profile

Elan is an Ireland-based biotechnology firm that encompasses two business units. Biopharmaceuticals includes the marketed MS and Crohn's disease drug Tysabri, as well as Read more

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