Why Elan Corporation, plc (ELN) Cut Its Ties To Tysabri

The medicine also reduced patients’ risks of flare-ups by 28% when given every four weeks compared to a placebo. The Weston, Mass. based company plans to apply for regulatory approval both here and abroad for the drug. The new treatment is a fresh version of its best-selling drug Avonex, which kicked-in some $2.7 billion to Biogen’s bottom line last year. Biogen is also waiting for FDA approval of its highly anticipated MS pill Tecfidera, thought to be more effective and better tolerated than existing injectable MS drugs.

Is Biogen planning to shelve Tysabri and push peginterferon and Tecfidera (with less adverse side effects)? That is pure conjecture and probably not likely. But with Biogen now in control of Tysabri, it’s worth a thought. Who knows what would happen to those royalty payments promised to Elan. What Biogen is doing is staking its place as the major player in the treatment of MS. And now with full control of Tysabri, Biogen has more flexibility with how the drug is sold and marketed.

Multiple sclerosis is an auto-immune disease that affects approximately 400,000 people in the United States and 2.5 million globally. There is not cure. The disease effects, progresses and responds differently in each patient, but medications are effective for many who suffer with the ailment.

Elan has been progressively streamlining of late. In December, the company separated a substantial portion of its drug discovery business Prothena Corporation plc – Ordinary Shares (NASDAQ:PRTA). Elan shareholders received one share of PRTA for every share of Elan in the demerger. Prothena is working on potential and novel therapies for neurological conditions like Parkinson’s and Alzheimer’s, inflammatory disease, and metastatic cancers.

Elan continues to work on treatments for a host of neurological and auto-immune diseases, including a promising Alheimzers’ drug with Johnson and Johnson. The upfront payment from Biogen provides Elan with cash to fund its research and development programs. The company gave little future guidance when it reported Q4 results for 2012 except to comment on the Tysabri deal. Revenue rose 18% to $319.8 million in the fourth quarter, but cash operating expenses remained flat.

The Irish based company is a survivor. A decade ago, it was questionable if the company could stay alive. Don’t underestimate Elan. The company has the luck of the Irish on its side.

The article Why Elan Cut Its Ties To Tysabri originally appeared on Fool.com and is written by Diane Alter.

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