Inside the world of business

Drugmaker Elan cannot afford to hang around

ON THE surface, results this week from Irish biotech group Elan served merely to clarify the clean lines of its new structure.

Strong growth in sales of the group’s multiple sclerosis drug Tysabri was the main driver of a rise in revenue.

The recent sale of the drug technology business refines the group’s focus and helps address its debt.

And the relocation of its main listing to the US recognises the reality of the company’s shareholder base and development focus.

On the upside, the number of multiple sclerosis patients receiving treatment of some sort is rising at a compound annual rate of almost 5 per cent through to 2015, and is expected to hit about 750,000 by then.

To put that into context, Tysabri is currently the treatment of choice for 64,000 people and Elan reckons that every 10,000 patients added to that number is worth $100 million (€70.6 million) in earnings before interest, tax, depreciation and amortisation.

The key here is isolating the number of patients who test negative for the JC virus, dramatically reducing their vulnerability to fatal side-effects from the drug.

Elan reckons as many as 350,000 patients are in that group and now has a test to screen for it. The test is approved in Europe but not yet in the US.

The second big issue for Elan is growing competition. Tysabri is still widely recognised as the most efficacious drug in treating multiple sclerosis, even with its risk profile.

However, the potential of the multiple sclerosis market means significant resources have been poured into research.

Novartis’s Gilenya has the advantage of being an oral drug – compared to Tysabri and others which are injectable.

French group Sanofi is investing heavily in Lemtrada, one of the jewels in the pipeline of US group Genzyme, which Sanofi acquired for €20.1 billion earlier this year.

That deal only went ahead when Sanofi promised Genzyme shareholders an extra $1 a share in the case of eventual approval of the drug by the US Food and Drug Administration and up to a further $12 a share should it reach certain sales targets.

And then there is Biogen, Elan’s partner in the Tysabri drug and one of the major players in the multiple sclerosis space.

It has just released the latest trials data for its own oral multiple sclerosis therapy, BG-12, for which it has high hopes.

Elan cannot afford to hang around. US approval of the JC virus test and its subsequent rapid rollout in this key market must be the priority.

Governments finally get tough on banks

ARGUABLY THE most positive aspect of the events of last Wednesday night and Thursday morning was the assertion by Europe’s governments of their authority over their banks.

It would be going a little too far to link this to the Occupy Wall Street movement and the raft of copycat protests it has sparked across Europe.

But without a doubt the extent to which the interest of banks and the interest of the citizen have been seen as analogous by governments in their handling of the crisis to date has not played well with the public.

The newer, tougher line taken with the banks in the early hours of Thursday is probably overdue.

If former US treasury secretary Hank Paulson’s troubled asset relief programme (Tarp) is the model for the leveraged European Financial Stability Facility, then the tough line taken with Wall Street banks to make them accept capital from Tarp is the corollary for Europe’s decision to force its banks to accept a 50 per cent writedown on Greek debt.

Just how resolute Europe will be in pursuing this new approach will become apparent soon enough.

The banks, through their umbrella body the Institute of International Finance, have already started to muddy the waters.

The banks are clearly hoping to minimise the impact of the haircut on Greek debt in net present-value terms by negotiating attractive coupons and maturities on the bonds that will be issued in exchange for the defaulted debt.

Europe hopes that by setting a target for what the nominal Greek debt will be at the end of the process – 120 per cent of gross domestic product – the banks’ wriggle room can be constrained.

A real danger is that the banks manage to split up the united front presented by the European governments, which has to be a possibility as some countries and some banks have a far greater exposure to Greek debts than others do.

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