Elan Corporation
(
ELN
) recently announced that it has entered into a manufacturing
agreement with
Lonza Group AG
(
LZAGY
). As per the agreement, Lonza will supply the active
pharmaceutical ingredient (
API
) of ELND005 (scyllo-inositol).
In December 2010, Elan had modified its agreement with
Transition Therapeutics Inc.
(
TTHI
) following Transition Therapeutics' decision to exercise its
opt-out right under the original agreement. According to the
modified agreement, not only has Transition Therapeutics returned
the 30% stake in ELND005 to Elan, it will also no longer fund the
development of ELND005. Elan paid Transition Therapeutics $9
million in January 2011 and is obligated to pay an additional $11
million upon the initiation of the next ELND005 study. However,
Elan will no longer pay the stipulated $25 million as a milestone
payment on the commencement of the phase III study for ELND005.
ELND005 is a small molecule beta amyloid anti-aggregation agent.
In August 2010, Elan and Transition Therapeutics had reported data
on ELND005 from a phase II study for Alzheimer's disease. While the
study failed to achieve statistical significance for its co-primary
endpoints, the companies said that the safety and tolerability data
were encouraging. Elan will continue to pursue the development of
the candidate for Alzheimer's.
Meanwhile, the company plans to evaluate ELND005 for other
indications such as bipolar disorder for which a proof of concept,
phase II study will be conducted. The agreement with Lonza will
help Elan ensure high quality supply of ELND005.
Our Recommendation
We currently have a Neutral recommendation on Elan. The stock
carries a Zacks #4 Rank (Sell rating) in the short run. The company
is highly dependent on Tysabri for revenue generation. In this
scenario, we note that an increase in the number of progressive
multifocal leukoencephalopathy (
PML
) cases associated with the use of Tysabri could lead to a slowdown
in the sales of the drug going forward.
ELAN CP PLC ADR (
ELN
): Free Stock Analysis Report
TRANSITN THERAP (
TTHI
): Free Stock Analysis Report
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