Macro Tsimmis

intelligently hedged investment

SELL Élan (ELN)—AAB-001 graded an “F”

Posted by intelledgement on Tue, 29 Jul 08

ELN researches presented their full Phase 2 findings at the International Conference on Alzheimer’s Disease in Chicago today, and while there were no surprizes—basically, the drug appears to help patients who are not carriers of the ApoE4 gene, which means it doesn’t help those most at risk of developing AD—researchers at the conference were unexpectedly negative on the ramifications of the results. In essence, the entire theory the drug is based on—that counteracting amyloid plaques in the brains of Alzheimer’s patients should ameliorate symptoms because these plaques are causing the disease—is now being called into question, as detailed in this report on the conference published by Forbes.

Obviously if eliminating the plaques is not efficacious, then AAB-001 is a blind alley.

ELN is down 20% in post-market trading today (this information was not available until after 4pm) to around $27/share. Given our analysis that without AAB-001 the stock should be worth around $15 or so, we are going to cash in our profits here (that is, at the open tomorrow), as obviously the conservative thing to do is to discount the value of AAB-001 pending further data.

If the market overreacts and drives the price down below $15, we may well jump back in. We still expect the stock should be worth $16-to-$18 by the end of the year, strictly on tysabri.

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