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Biotech / Medical : Elan Corporation, plc (ELN)
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To: IRWIN JAMES FRANKEL who wrote (10037)10/31/2008 9:38:53 AM
From: tom pope   of 10345
 
Merrill

(BIIB oriented)

BIIB to face headwinds from first U.S. Tysabri PML case
Yesterday, Biogen Idec reported that the third case (since re-launch) of a rare
brain infection (PML) occurred in a U.S. Tysabri monotherapy Multiple Sclerosis
patient. Little was disclosed about the patient’s clinical course or prognosis other
than that the patient had received 14 rounds of monotherapy, suggesting an
exposure time of ~14 months. The patient received several rounds of
plasmapheresis after the diagnosis was suspected, but it is unclear whether the
patient remains hospitalized. While another case of PML was highly anticipated
and reflected in our estimates, we believe BIIB shares will be pressured,
especially in the current risk-adverse climate. We have not lowered sales
estimates or adjusted our Tysabri patient model, but contracted multiples to reflect
a continued overhang on BIIB. Our new price objective is $42 from $51.

Ability to alter clinical course with vigilance important
The 2 prior cases in the E.U. were not fatal following clinical vigilance. The E.U.
does not have a formal risk map like the TOUCH program in the U.S. Therefore,
we await further clarity on the clinical course of the U.S. patient to assess the
ability of this program to alter the course of the disease. An ability of TOUCH to
significantly alter the prognosis of PML is important, and may temper the stigma
associated with this disease (and acceptable rate of occurrence). The company is
hosting a round table tomorrow--we hope to gain incremental granularity.

Despite foresight, BIIB likely to be pressured
Another case of PML was widely anticipated, and we doubt that the regulatory
authorities will take action other than minor revisions to the label. While BIIB is
trading at a compelling multiple, the threat of PML will likely remain an overhang.
We believe BIIB shares will continue to Underperform until Tysabri’s outlook is clear.
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