Elan stumbles

Hi all,

Where to begin tonight? I have to admit I am a little glum, just from the share price point of view. Elan presented the detailed results from their Phase II trial tonight at ICAD – the International Conference on Alzheimer’s Disease – this is one of the two largest AD symposiums in the world (other one is the AAN). In June they had released summary results and by all indications it was a total success.
The trial was for their drug AAB-001 and involved 240 patients. 4 different doses were given, and half got the drug and half got placebo. So really, 30 people got the drug at each dose. Overall, they missed statistical significance on both the cognitive and functional endpoints for the study.
So why do I say it was a success?

First, Phase II trials are still mostly concerned with safety and determining dosing strength, and secondarily with efficacy. After looking through the results, they discovered that the non-carriers of a certain gene (APOe4) got statistically significant cognitive AND functional results from the drug, and even the carriers “trended” towards significance. Carriers of that gene, by the way, have already been proven to be a higher risk to develop AD, so it is not just out of left field to latch on to that subgroup.
How about safety? The largest problem for the carrier group at the highest dose was vascular edema (VE), which is a temporary swelling of the brain. None of the 12 affected patients were harmed and all recovered AND continued in the trial at a lower dose. However, because they “switched” mid-trial, their results were not counted, which hurt the overall trial – 12 extra patients in the denominator but not counted in the numerator! Add to that, the lowest dose was also found in the Phase 1 results to not have much if any impact, but they stayed with that dose in the Phase II trial to confirm – another 30 patients who really did not count except to hurt the overall study.
Yet even with those hiccups, they STILL found significant improvement over placebo in the non-carrier group.

Elan started a Phase III trial last December – 4000 patients worldwide; 2000 in the US and 2000 in Europe. Each of these have 1000 carriers and 1000 non-carriers, so even with the carrier reactions, they still saw enough significance to have them be half of the participants! This is an 18 months trial, again with both cognitive (measurement of mental decline) and functional (how do they actually function in the real world) endpoints.

So – tonight.
They gave all this and the actual numbers and P-values (basically the probability that the result achieved was real and not just a fluke) and some extra safety info. 3 patients given the drug died. Sounds bad, but the trial doctors were all unanimous in that the drug had no affect on those deaths – if they were mugged, they’d still be reported as having died during the trial. Yet the very first headline I saw from Reuters was that “Patients died in Elan’s Alzheimer’s trial”.
The share price was around $34 and sank during after-hours trading down to $23.

The CEO will be speaking right after market open tomorrow on CNBC, and I hope to hear something about pricing and when they might potentially file for an early FDA approval. If not, we may see low $20s for awhile.

All that said, I am still a staunch supporter. I think the drug works, (and with a medium strength dose even for the carriers) and in the worst case there is only 20 or so months for the trial to end. Even if only the non-carriers get approved, that is still tens of billions of profit, which would make it the best selling drug ever, by multiples.

Even without AAB-001, they have Tysabri and their nanotechnology drug delivery unit, which combined would value the company at around $35 per share. They still have a world class pipeline with other drugs for AD, Parkinson’s disease, and diabetes.

I think this is a world-class buying opportunity.

Regards,
Trond