Global Insight Perspective | |
Significance | Elan Corporation has called for an external strategic evaluation of its business options, which according to the company is designed to extract the maximum value from its pipeline. |
Implications | In the midst of the present credit access conditions, safety concerns over revenue driver Tysabri (natalizumab) and the company's cash position, speculations will be running high on the reasons behind the present review. |
Outlook | Elan's full-year financial results due to be published on 10 February will give a clearer picture of the company's actual financial position. Elan will need to post a strong set of Tysabri sales figures in order to soothe concerns over the future of the company. If in need of quick cash, Elan retains the possibility to divest its drug delivery business but the price tag attached could be below the biotech's initial expectations. |
Irish biotech Elan Corporation has announced an external review of its strategic business options that aims to identify the best ways to access the financial resources and marketing infrastructure needed for the advancement of the company's clinical research programmes and commercialisation of resulting products. The review will assess a variety of strategic options such as "minority investment or strategic alliance, a merger or sale". The company has added that it may however not go through with the resulting suggestions. Elan is not planning on providing updates on the review until it is completed or a deal is agreed on. The move comes after the company completed its annual review of its pipeline and associated clinical opportunities in Alzheimer's, Parkinson's, and multiple sclerosis (MS). In a separate press release, the company has denied that its Phase III clinical trials involving Alzheimer's candidate treatment bapineuzumab will run over. Elan re-iterated that the trials will last for 18 months as planned in December 2007.
Elan currently has 12 ongoing research development programmes, two-thirds of which are focussed on the treatment of Alzheimer's disease (AD, see Table). Elan's most advanced AD programmes are intravenous bapineuzumab (AAB-001), developed in collaboration with U.S. pharmaceutical company Wyeth, and gamma secretase inhibitor LY450139, developed in collaboration with U.S. firm Eli Lilly. Eli Lilly last year estimated that the total size of the Alzheimer's disease market stood at more than US$15 billion (see United States: 3 October 2007: Lilly Eyes New Alzheimer's Drugs, Calls for Pharmacovigilance Reform).
Elan Corporation, Pipeline and Marketed Products Snapshot | ||||
Pipeline | ||||
Indication | Drug | Drug Class | Development Partner | Developmental Phase |
Alzheimer's Disease | bapineuzumab, intravenous | Monoclonal antibody | Wyeth | Phase III |
LY450139 | Gamma secretase inhibitor | Eli Lilly | Phase III | |
ACC-001 | Immunoconjugate | Wyeth | Phase II | |
ELND005 | Abeta Aggregation inhibitor | Transition Therapeutics | Phase II | |
bapineuzumab, subcutaneous | Monoclonal antibody | Wyeth | Phase I | |
AAB-002 | Monoclonal antibody | Wyeth | Preclinical | |
gamma secretase research | Preclinical | |||
beta secretase research | Discovery | |||
Parkinson's Disease | Parkinson's research | Discovery | ||
Autoimmune Diseases | ||||
- Multiple Myeloma | Tysabri | Monoclonal antibody | Biogen Idec | Phase II |
- Other | Small molecules natalizumab follow-ons | Phase I | ||
Autoimmune research | Discovery | |||
Marketed Products | ||||
MS | Tysabri | Monoclonal antibody | Biogen Idec | Marketed in United States and Europe |
Crohn's Disease | Tysabri | Monoclonal antibody | Biogen Idec | Marketed in United States |
Severe Chronic Pain | Prialt | Marketed in United States | ||
Infectious Diseases | Azactam | Antibiotic | Off-patent | |
Maxipime | Antibiotic | Off-patent | ||
Source: IHS Global Insight, adapted from Elan Corporation | ||||
Outlook and Implications
The news of a business strategy review comes hot on the heels of Elan's denial of a possible take-over by U.S. pharma heavyweight Pfizer (see Ireland: 12 January 2009: Elan Denies Takeover Talks with Pfizer). Although the company has dressed up the present review as a bid to maximise its pipeline's potential, its full-year financial results, due to be published on 10 February, could reveal a bleaker picture. Elan derives most of its pharmaceutical revenues, 82% in the third quarter of 2008, from MS drug Tysabri (natalizumab). Over the last six months the drug has been at the centre of adverse drug reaction reports and the potential impact on the drug's sales has yet to be unveiled (see United States - Ireland: 16 December 2008: Pressure Mounts on Elan, Biogen as Tysabri is Linked to Fourth PML Case). Although the drug is unlikely to be pulled off the market, consecutive reports of its side effects could result in a slowdown in sales. Sales and patient figures for the second and third quarters of 2008 indicate that this is a possibility. Indeed, sales of Tysabri grew by 25.2% quarter-on-quarter (q/q) in the second quarter of the year and by 18.5% q/q in the third quarter. In terms of patients, the number of Tysabri-treated patients did not grow as fast over the course of the third quarter either.
At the end of November 2008, Elan's chief executive revealed that the company's cash position stood at about US$450 million while it needs an annual US$300 million to sustain its operations. Furthermore, the company currently has an outstanding debt of US$1.7 billion, including a US$1.15-billion commitment that expires in 2011. Although the company has recently made efficiency cuts, the anticipated savings will fall way short of its actual cash needs (see Ireland: 12 December 2008: Elan Announces Cuts, Redirects Funds Towards Pipeline). In the current market conditions and considering the turmoil surrounding Tysabri, Elan is likely to face an uphill battle to attract investors. The company will be looking at licensing out six to ten early phase products in order to raise US$500 million in the short term. A look at Elan's pipeline shows that its most advanced programmes are already licensed out, which leaves it with no choice but to sell off earlier and riskier products that will attract lower upfront payments and most likely a pay-by-result deal structure. Regarding a potential merger or a sale of the company, Irish newspaper The Sunday Independent yesterday revealed that Elan had granted U.S. partner Biogen Idec the option to acquire its share in Tysabri, should the Irish biotech be taken over, a clause that would make Elan a lot less attractive to any potential suitor. Elan still has the possibility to divest its drug delivery business but should the financial pressure mount on the company, it would be unlikely to achieve its target price tag (see Ireland: 22 October 2008: Elan Postpones Drug Delivery Business Sale).