Trading is not a game of exacts. Perfectionists need not apply. Markets are made up of many irration...
Two Takes on Tysabri
04/07/2006 12:00 am EST
Over the past year, we’ve covered the FDA saga of multiple sclerosis drug, Tysabri. Ken Kam and John McCamant—both active followers of the situation—see opportunity, However, each is focused on the different partners—Biogen and Elan—involved in the drug.
John McCamant, editor of the Medical Technology Stock Letter, explains, "There has never been a question about the dramatic benefit that Tysabri has provided MS patients. However, just over a year ago, Tysabri was voluntarily removed from the marketplace, as three patients were found to have PML, a potentially fatal disease. We then recommended Biogen (BIIB NASDAQ) at $36.04, right after the stock received a severe haircut in response to Tysabri withdrawal.
"Meanwhile, an extensive safety review of over 3,000 Tysabri clinical trial patients was conducted and no new cases of PML were discovered and, ultimately, these facts culminated in a unanimous decision by an FDA advisory committee recommending that the drug be allowed back on the market, albeit with some significant restrictions. Final action by the FDA was expected by March 29, but the FDA recently extended its review by 90 days. This will likely end up being just what it is—a minor delay—and we believe the FDA will follow the panel’s advice, as it almost always does, and eventually approve the re-introduction of Tysabri.
"In essence, Biogen made an effective argument that properly informed patients should have the right to choose for themselves whether the overwhelming benefits of Tysabri therapy are worth the risk of contracting a potentially fatal condition like PML. Indeed, there are many issues that still need to be resolved. However, it is also clear that the FDA recognizes what a valuable MS treatment alternative Tysabri is. As long as patients and their doctors are fully aware of the risks, then it should be up to them to decide whether or not it is worth it to take Tysabri.
"Importantly, when we first recommended Biogen, we had never factored Tysabri into our investment equation, because we thought that their other programs alone were worth more than what the stock was selling for at that time. We still believe that the potential in Rituxan—its inflammatory disease treatment—is being truly underappreciated. As such, we viewed at that time, and continue to believe today, that any upside from Tysabri sales will be icing on the investment cake."
Ken Kam, editor of Marketscope and manager of the Masters 100 Fund, notes, "Elan Corp. (ELN NYSE) announced that the FDA extended its review of Tysabri by up to 90 days. We were surprised and disappointed. After all, who in their right mind would delay the release of a drug that can help tens of thousands, if not hundreds of thousands of MS patients? But we don’t live in a perfect world. This latest news does not change my opinion on the potential for Elan to double over the next two years.
"The FDA Advisory Panel estimated that patients on Tysabri have a one in a 1,000 risk of contracting PML (an often fatal complication). The FDA wants Biogen and Elan to closely monitor every patient who takes Tysabri so the FDA can better determine the true risk of PML over time. According to Elan, the FDA wanted the additional time to assess Tysabri’s risk-management plan. But with its deadline at the end of March, the FDA simply ran out of time. Now they have until June 28.
"Although it is not their standard practice—and because I still believe the FDA is trying to do the right thing—I think there is a good chance the FDA will not wait until the last minute to make their decision. In our opinion, this is providing investors with another opportunity to establish or fill your position in ELN for your portfolio if you haven’t already done so."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...