Friday, September 29, 2006

Analyst Worries About Tysabri

By Althea Chang Staff Reporter
9/26/2006 11:40 AM EDT

Tysabri, the multiple sclerosis treatment from Elan (ELN - commentary - Cramer's Take) and Biogen Idec (BIIB - commentary - Cramer's Take), appears to be getting hit by the strict safety rules that accompanied the drug's reapproval by regulators, according to one analyst.

Deborah Knobelman of the research firm Piper Jaffray slashed her estimate for worldwide Tysabri sales to $21 million for this year, down from her previous $123 million expectation. According to her feedback from doctors, physicians' adoption rates of the drug were slower than she had anticipated in the U.S. because of safety concerns, reimbursement procedures and patient-monitoring requirements.

Tysabri was recleared by the Food and Drug Administration earlier this year after being taken off the market for fear it could be linked to a potentially fatal brain illness. Before the drug could again go on sale, its makers had to agree to meet a number of criteria dealing with safety monitoring for side effects.

"The current, and in our view, overvalued, [Elan] stock price is not reflective of our new 2006 Tysabri estimates," Knobelman wrote in a research report. "Even if Tysabri revenues reach $1 billion (our peak sales assumption), the stock's current valuation reflects almost double Tysabri's peak potential. We believe [Elan's] Q3 report will reflect our lowered estimates, which might close the stock price's valuation disconnect."

Knobelman maintained an underperform rating on Elan's shares, with a price target of $10. The stock was trading down 14 cents, or 0.9%, at $15.73 Tuesday. Biogen Idec's shares fell 7 cents, or 0.2%, to $44.64.