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Biotech / Medical : Elan Corporation, plc (ELN)

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To: Qualified Opinion who wrote (3436)	10/27/2002 4:44:31 AM
From: Icebrg	Read Replies (1) of 10345

Thanks Rob, that was an interesting read. And some comments to Dr. Armen's views and expectations. Asset disposal program. It seems as if the company might have decided to carry their re-structuring even further than previously planned. Bringing in another billion USD means that another billion worth of assets has to be cut away somewhere. Product sales. The current CNS/Pain portfolio brings in about 430 mUSD on a yearly basis. After having taken out Zanaflex completely. Armen says he is aiming for 500 mUSD from the current pipeline. I suppose that in the current pipeline Frova and Avinza are included. I believe the 500 might be achievable. Zonegran has been growing nicely and Frova + Avinza should bring more. The big threat to this perhaps somewhat optimistic sales projection is the risk of generic competition for Skelaxin. If Skelaxin falls about 150 mUSD of sales will be lost. That would be extremely bad. A further risk a couple of years down the line could be more competition for Sonata (a 100 mUSD market for Elan). Sepracor seem intent of filing their NDA for ESTORRA before the end of the year and the NDA for Neurocrine's Indiplon should follow towards the end of next year. Even if these drugs will not kill off Sonata completely the competitive landscape will become even tougher. Especially if Indiplon ends up with a big and strong pharma marketing partner. (Neurocrine doesn't plan to market the product themselves). The pipeline. I am surprised to see the pipeline described as low-risk. I would rather describe it as high-risk with a lot riding on one single product - Antegren - intended for use in two very difficult indications. The potential of Antegren is very big. Trial results so far have been promising. But still. I am worried at least for the Crohn's indication after Millennium seemed to have come up empty-handed with what to me appears to be a very similar product (MLN02). Perhaps there are important differences between the two products mode of operation. But, the MLN02 results should at least serve as a warning signal. Apart from Antegren there is Prialt. But realistically speaking. Everything seems to indicate that this will be a rather marginal product. The FDA and Elan could evidently not agree on a label for the product and Elan was forced into an additional phase III. Whatever comes out from that effort will IMHO turn out to be very short of the original expectations. ELN 154088 with an expected NDA-date of Q1 2004. Well, I haven't been able to find any information on that product. And the time-line looks optimistic as phase II trials are supposed to start this year (and nothing has even been announced yet). The Alzheimer's franchise. The hints thrown around that AN1792 might after all not be quite dead were of course extremely encouraging. Good news on that front would be worth at least a couple of dollars on the share price. When the bad news of the trial's suspension was released in January the stock lost 6 dollars. I would be very happy to see it recover half as much. That will of course not happen. Realistically, I believe that even if the AN1792 program is resurrected, it will take a couple of years to work out what to do about the inflammation problems seen and to test out any modifications to the program. But still - this is one of the company's focus areas and all good news are indeed much needed. Even if the new insight gained will not lead to a re-emergence of AN1792, but just provide guidance for the next program down the line. The Debt and The LYONs. The uncertainty of if and how Elan will be able to meet the expected puts of LYONs in December of next year is most probably the main reason why a share these days may be had for a dollar and some change. On that count I think that Armen's indication that an additional billion dollars may be found among the company's surplus assets to be very re-assuring. If that really is the case the door is opened for the company to attack the LYON issue with a lot of open possibilities. Which will most probably end up in a situation where all the bonds will not even be put. The short position. As always - one needs money to make money. The indication of an additional billion finding its way to the company tills is in my opinion very positive and will take away a lot of the pressure from the stock (if realized). If I was short Elan and thought that Elan had a reasonable chance of even meeting its original plan to raise 1,5 billion dollars from asset sales, I would close the position as fast as possible. There is frankly not much more to be gained on the down side. And especially not if the company would turn up with an additional 2,5 billion dollars in the bank. Why fight a fight that can never be won. There must be much less risky ways of beating the market. Erik

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