Considering Elan
22 July '09
Financial and pharma companies make risky investments; some of the world's most successful investors agree that even the CEOs of such companies don't have enough information to make a call on where their share price is headed. Throw beleaguered building suppliers into the mix and between drug businesses and banks and you have the majority of Irish interests listed on US stock markets. Not a lot a lot to get excited about right now.
Despite the dark abyss that is pharmaceuticals I'm starting to take interest in Dublin and Athlone based Elan Drug Technologies.
Elan is best known for developing the blockbuster drug Tysabri, which treats multiple sclerosis and Crohn's disease. As I'm sure you've read, their precipitous share price collapse from a high of about $35 in July '08 to a low of around $5 the following March was down to numerous unfavourable outcomes for patients on the treatment.
Elan's future growth potential however lies in their Alzheimer treatment, bapineuzumab. The company, with partners, are industry leaders in R&D into the illness and probably have the best Alzheimer's drug pipeline. This fact didn't go unnoticed by health care giant Johnson & Johnson who earlier this month bought an 18.4% stake in Elan for $1B. J&J are also funding a new company for $500 million that will receive Elan's Alzheimer's drugs, including bapineuzumab: Elan will own 49.9% of that company. With J&J's vast resources this is a significant partnership, but more noteworthy a statement of the company's belief in what Elan have got going on. Considering this, Elan's improved year-on-year revenue and near all time price lows, I might take a small stake in Elan in the weeks ahead.
Finally, while there are signs that the J&J relationship will go from strength to strength, potential investors need to remember that with this company comes a more than an average share of risk.
