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Biotech / Medical : Elan Corporation, plc (ELN)
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To: Bob Howarth who wrote (561)10/31/1999 6:30:00 PM
From: Gary Korn   of 10345
 
In a 10/27 research report by Merrill, the byline is: "We Think the Stock is Undervalued"

Some comments from the report:

ú Elan's stock valuation now appears to be
unusually attractive. Our Buy rating is
affirmed.

ú We believe investors have a misimpression
about the status of Elan's pipeline in view of
the now anticipated delay for its inlicensed
migraine drug, Miguard, which we now expect
will be launched in early 2001. We expect
three new drugs to be launched in 2000 -
Neurobloc, for dystonia, Zonagren, for
epilepsy, and ziconotide, for severe pain.

ú We believe the FDA review for Neurobloc is
well advanced with approval likely by year
end within the standard 12 month review. All
data generation for ziconotide has been
completed and the NDA package is being
compiled for a year end NDA submission. We
believe that it will be granted a priority (6
months) review. While Zonagren has been
"approvable" by the FDA for sometime we
believe that the delay has been due to Elan's
efforts to secure a label that will be superior to
other products used as adjunctive therapy in
epilepsy. Success could lead to significantly
higher revenue potential.

ú We believe that the IND has been filed with
the FDA. Thus, we expect Phase I clinical trials for
AN-1792, to treat Alzheimer's
disease to begin next month. We note that this
trial could be expanded quickly considering
that 70 patients having mild Alzheimer's
disease will be in the initial trial.

ú Yesterday's third quarter earnings report was
in line with our expectations. The quality of
the report was high as directly marketed
products more than doubled. Organic growth
was up about 98%, (ahead of budget) and
accounted for 78% of incremental product
revenue. Royalties and fees rose only 4%. We
expect Elan to reach its 2001 $1 billion
revenue target this year, and is on track to
reach their goal of $2 billion by 2003.

ú The current stock P/E multiple is 16.2x our
2000 estimate and is at a significant discount
to our projected EPS growth rate. We expect
stock performance to improve as product
launches come into greater focus.
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