Elan, Biogen dive on MS drug safety scare

By Paul Hoskins and Ben Hirschler

DUBLIN/LONDON (Reuters) - Shares in Irish drugmaker Elan Corp PLC (ELN.I: 行情) lost half their value on Friday while partner Biogen Idec tumbled 25 percent as renewed safety concerns call into question the future of their multiple sclerosis drug Tysabri.

Elan's shares hit their lowest level since 2005, as a second product setback in a week shattered confidence in its line-up of biotech medicines. Cambridge, Massachusetts-based Biogen Idec plunged to its lowest level since June of 2007.

The double whammy leaves Elan's future unclear, although investors said it was not an obvious takeover target.

Elan and its U.S. partner Biogen Idec (BIIB.O: 行情) revealed late on Thursday two new brain disease cases in patients taking their Tysabri multiple sclerosis drug, which has already been pulled from the market once on safety fears.

"This is a huge blow to Tysabri," Jack Gorman, an analyst at Davy, which acts as stockbroker to Elan, said in a research note.

"Although the risk management program seems to have picked them up quickly, which is good, the impact on neurologist take-up puts our forecasts at serious risk."

Second-quarter sales of the product totaled $200 million.

The latest slide means shares in Dublin-based Elan have lost more than two thirds of their value this week. The stock slumped 30 percent on Wednesday after disappointing data on an experimental Alzheimer's drug Elan is developing with Wyeth

(WYE.N: 行情).

The shares ended down 46 pct at 7.35 euros after a low of 4.00 euros, while Biogen lost 25 percent to $52.72 on the Nasdaq.

The news delivered a fresh blow to the Irish stock market which is the world's second worst performing behind Vietnam .VNI over the last 12 months. Elan's slide dragged the Irish Stock Exchange Index .ISEQ 6 percent lower on Friday.

Elan had been one of the few gainers this year on a market that has slumped 60 percent since early 2007 and is heavily weighted with banks and construction companies hit by the bursting of Ireland's property bubble.

The success of Elan, which recovered from a brush with bankruptcy in 2002, has been linked closely to Tysabri and its Alzheimer's drug.

Should both programs go on to deliver as hoped, Elan could be a bargain at current levels -- but the significant risks and Elan's existing alliances may deter predators.

"I don't think it is an easy thing that anyone is going to be rushing in making a bid for the company," said Iain Galloway, investment director with Standard Life Investments.

NO PLANS TO PULL DRUG

Tysabri was withdrawn in 2005 after three patients developed the potentially deadly brain infection progressive multifocal leukoencephalopathy (PML). The drug returned to the market in 2006 with warnings and tougher prescription guidelines.

A company spokeswoman said the withdrawal of Tysabri was not under consideration, adding that new cases of PML had always been expected.

"The benefit-risk profile of Tysabri remains favorable," she said.