Macro Tsimmis

intelligently hedged investment

Élan (ELN) update #8

Posted by intelledgement on Wed, 13 Feb 08

Our top-tier biotech Élan (ELN) released their 4Q07 results today and revenues were up sharply thanks to the impact of tysabri sales ($232MM in 2007 compared to $18MM in 2006). Overall, the company is still in the red, but the EBITDA loss fell 67% in 2007 to $30MM as compared to $91MM in 2006. There are now 21,000 tysabri patients worldwide, which is well ahead of our projection from last April (17,500)…although in compensation, we overestimated tysabri revenues (we expected $250MM in 2007). According to management, they are still on track for 100,000 tysabri patients by the end of 2010, expect to book close to $1B in revenues overall in 2008, and achieve breakeven results in the second half of 2008.

We have updated our model to reflect the higher patient numbers—we now expect 120,000 by the end of 2010—and lower revenue numbers (we failed to consider that only partial revenues would be collected from patients who start using tysabri in a given year, depending on when they start).

The biggest cost factor this year will be the spending on the huge Phase 3 trial for the Alzheimer’s drug AAB-001 (bapineuzumab). A 4000-patient Phase 3 trial for AAB-001 began in December 2007, which is unusual in that final results from the Phase 2 trial are not yet available. Presumably, the preliminary results must be very positive if Élan and their partner Wyeth (WYE) are willing to finance this Phase 3 study.

Overall, the combination of strongly growing tysabri sales and the potential for faster-than-expected approval of AAB-001 if the results bear out management’s evident optimism have us feeling good about our Élan position at this point…and thinking the stock could be worth $55-to-$73/share by the end of 2010 if all goes according to the master plan.


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