We have written about the pressure on shares of Elan Corp. (NYSE:ELN), which has been taking place in advance of the expected market entry of Biogen Idec’s (NASDAQ:BIIB) BG-12 treatment for multiple sclerosis (MS). BG-12 is an orally dosed medicine with strong efficacy and safety profile as demonstrated in Phase III studies. Tysabri, ELN’s MS product and primary value driver, is an injectable drug also with strong efficacy but highly unfavorable side effects including the potential for PML, which could lead to death. ELN and BIIB both market Tysabri, and speculation that BIIB could acquire ELN has been supporting ELN’s premium valuation. We don’t believe that BIIB will acquire ELN given BIIB’s focus on making BG-12 a success, and that ELN is overvalued and shares could trade back into the single-digit range. (See PropThink’s prior story here.) While we continue to believe this is how things will play out, news today that the FDA will take up to 3 additional months to finalize its decision on BG-12, is likely to send shares of ELN higher. The original FDA Action Date (PDUFA Date) for BG-12 was set for December 28th, but today, the company announced that the agency will need additional time to review BG-12’s new drug application (NDA). Importantly, the FDA did not request additional clinical trials for its review of the candidate. Expect shares of ELN to trade up on the news, with BIIB weakening for the same reason. Given BG-12’s favorable profile, its oral regimen, and the continued medical need for new MS treatments, approval of BG-12 remains a high probability event. In fact, it would not surprise us if approval of BG-12 comes earlier than the 3 month extension implies.
