Investopedia: Elan Shareholders Bring Management To Heel

Financial writers often lament that shareholders are too passive with respect to exercising their rights to oppose management decisions that they disagree with and holding management to account. Well, that can't be said about Elan's (NYSE:ELN) shareholders. Shareholders handed a significant and embarrassing collection of rejections to management, a move that I would argue expresses a very wise lack of confidence in management. With this rejection of management's strategy, I would hope that Elan management sees reason and seeks out the best deal available to sell the company.

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http://www.investopedia.com/stock-analysis/061713/elan-shareholders-bring-management-heel-eln-thrx-biib.aspx

Investopedia: Elan Continues To Make Baffling Strategic Decisions

When Elan (NYSE:ELN) announced back in February that it was selling its interests in Tysabri to Biogen Idec (Nasdaq:BIIB) my biggest concern was that Elan management would waste the proceeds. Elan management had made a series of questionable (if not bizarre) decisions prior to the Tysabri announcement, and I had minimal confidence that they would do the right thing – which, in my opinion, was simply to sell off the remaining assets and write a check to shareholders. Since then, the company's two major strategic decisions only reinforce my worries that Elan shareholders are not going to be well-served by management in the deployment of this cash.

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Seeking Alpha: Post-Tysabri, Will Elan Waste The Windfall?

It was no secret that Biogen Idec (BIIB) wanted to gain 100% control of the successful MS drug Tysabri, but it was likewise no secret that the company had virtually no interest in acquiring its partner Elan (ELN). As a result, Wednesday's announcement that Biogen Idec will buy all rights to Tysabri looks like a win for the company, provided the drug continues to grow.

The question is whether Elan shareholders will really benefit from this deal. Pulling forward the Tysabri revenue stream certainly de-risks part of the story, but now investors have to contend with the question of how management will handle that cash. At this point, I'm not optimistic as the plans laid out by Elan management suggest that they have a much higher opinion of their capabilities than the facts would seem to support.

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Post-Tysabri, Will Elan Waste The Windfall?

Seeking Alpha: Elan's Split Will Create 2 Very Different Companies

Give credit where due - Ireland's Elan (ELN) has always been willing to take dramatic steps in the hope of improving ultimate returns to shareholders. The latest move is a doozy - basically splitting the company into an early-stage research-driven biotech and a cash-farming collection of assets. Odd as it may seem, this may be a case where breaking up a company results in parts worth more than the whole.

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Elan's Split Will Create 2 Very Different Companies

Seeking Alpha: Alzheimer's Drug Bapi Looks Done (Again)

Denial and bargaining are integral parts of the Kübler-Ross grief hypothesis, and anybody who writes about the healthcare and biotech sectors knows that Elisabeth Kübler-Ross was on to something. When I last wrote about the disappointing results of bapineuzumab (or bapi), a drug that Pfizer (PFE), Johnson & Johnson (JNJ), and Elan (ELN) were developing for Alzheimer's disease, I suggested that the drug was a goner and investors should respond accordingly.

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Alzheimer's Drug Bapi Looks Done (Again)

Seeking Alpha: The Next 12-18 Months Will Shape Lilly's Future

My skepticism on Lilly (LLY) hasn't paid off so well of late, with the stock up about 12% over the last quarter and nearly 7% for the year to date. That said, I still think this company has a lot left to prove in terms of its pipeline quality and future expense structure. The stock is on a solid run, but this still wouldn't be among my choices for new money in Big Pharma.

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The Next 12-18 Months Will Shape Lilly's Future

Seeking Alpha: A Disappointing, But Not Altogether Surprising, Failure For JNJ And Pfizer

Some diseases are notoriously hard targets for new pharmaceutical development, and Alzheimer's may well be one of the worst. There are very few drugs on the market for the disease (Forest Labs' (FRX) Namenda and Pfizer's (PFE) Aricept are the two most prominent), but Johnson & Johnson (JNJ), Pfizer, and Elan (ELN) hoped to defy the odds and bring a new Alzheimer's drug to market - bapineuzumab.

Unfortunately, Pfizer's news announcement Monday after the close largely brings that hope to an end.

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A Disappointing, But Not Altogether Surprising, Failure For JNJ And Pfizer

Investopedia: Biogen Idec Has Built A Valuable Franchise

Diversification is all well and good, but there's nothing wrong with a well-run company that does a few things very well. With an enviable franchise in multiple sclerosis, a promising pipeline and a host of pharmaceutical giants desperate for growth and operating leverage, Biogen Idec (Nasdaq:BIIB) could yet have a few surprises left for shareholders.

Steady Progress in Q3 
Third quarter results did not have a lot of financial surprises, but Biogen Idec continues to grow nicely. Total revenue rose 11%, with Tysabri, which the company sells in partnership with Elan (NYSE:ELN), growing 26% and key drug Avonex showing 6% sales growth. Although Avonex seems to be showing some wear with Novartis's (NYSE:NVS) drug Gilenya on the market, it still represents over half of the company's sales.

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http://stocks.investopedia.com/stock-analysis/2011/Biogen-Idec-Has-Built-A-Valuable-Franchise-BIIB-ELN-NVS-DGX-MKGAY.PK-TEVA-SNY-PFE1101.aspx

Investopedia: Teva's Rocky Road

It's usually a great idea to buy proven long-term winners when the Street goes momentarily sour on a company's ability to stay in the game for the long-term. Companies as different and varied as Coca-Cola (NYSE:KO), McDonalds (NYSE:MCD) and Stryker (NYSE:SYK) have rewarded contrarian thinking, and it is an established investment philosophy. 

The question now is whether Teva Pharmaceuticals (Nasdaq:TEVA) is just such a play. Not only has the company had to deal with recent FDA violations in its facilities, but there is now widespread concern about the company's ability to maintain its lucrative multiple sclerosis franchise. What's more, there is another potential risk on the horizon - the end of a major run of patent expirations that have fueled generic growth across the industry. (For more, see 6 Drug Companies With Expiring Patents In 2011.)

Trouble in a Lucrative Franchise 

Biogen Idec (Nasdaq:BIIB) recently released favorable trial results on its oral multiple sclerosis drug candidate BG-12. This drug showed more than double the rate of two-year relapse reduction (49%) of Teva's drug and a similar reduction in disease progression (38%). Like Teva's laquinimod, BG-12 is an oral drug, and also like Teva Biogen has an established MS business in place (selling drugs like Avonex and co-marketing Tysabri with Elan (NYSE:ELN).

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http://stocks.investopedia.com/stock-analysis/2011/Tevas-Rocky-Road-TEVA-BIIB-ELN-NVS0426.aspx

Investopedia: Tepid Teva Somewhat Tempting

Once again Israeli generic drug giant Teva Pharmaceutical (Nasdaq:TEVA) has proven that although generic competition may bedevil the branded drug industry, there are no free rides here either. Teva's results and outlook will likely leave the stock cooling its heels for a bit in this growth-obsessed market, but patient investors should find no particular causes for long-term concern.

A Sluggish End to the Year
Before delving into Teva's results, it is worth repeating that Wall Street is a game of relative performance; companies can report objectively good (if not great) results and nevertheless disappoint analysts and investors.

To that end, Teva's 16% revenue growth this quarter was not bad, even if it was about 5% shy of the consensus estimate. While the company's biggest drug, Copaxone for multiple sclerosis (MS), did well with 26% sales growth (more than one-fifth of the company's sales), North American generic sales declined 5%. That is a bit puzzling, particularly given the company's exclusivity on generic Effexor XR. Then again, with doctor visits down across the board in the U.S., maybe that is where the answer lies. (For more, see There's Nothing Generic About The Profits.)

Profitability was not too problematic this period. Gross margin improved by both GAAP and non-GAAP calculations, and the company's non-GAAP operating income grew about 23% for the quarter. All in all, the company missed the average analyst guess by about three cents, though a better-than-expected tax rate helped. (For more, see Zooming In On Operating Income.)

The Road Ahead
Perhaps it has been going on a bit too long now to still be ironic, but one of the major concerns surrounding Teva involves competition in its branded drug business. Novartis (NYSE: NVS) will likely take some business away from Teva with its new oral MS drug Gilenya, and Genzyme (Nasdaq:GENZ) likewise has big hopes and expectations for its entry into the market.

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Lilly - Another Reminder That Alzheimers Drugs Do Not Work

I was disappointed to see Lilly's (NYSE: LLY) announcement a few days ago that its Alzheimers drug semagacestat was not good enough to continue trials.

Disappointed ... but not surprised.

The pharmaceutical industry's record with drug candidates for Alzheimers is miserable. Only Namenda (from Forest Labs (NYSE: FRX) and Aricept (Pfizer (NYSE: PFE) and Eisai) do much good at all, and even those really only address symptoms for a relatively brief window of time.

A whole host of companies, though, have tried and failed to develop a drug - the roster includes Glaxo (NYSE: GSK), AstraZeneca (NYSE: AZN), Johnson & Johnson (NYSE: JNJ), Abbott Labs (NYSE: ABT), Pfizer, and Neurocrine (Nasdaq: NBIX). That is a partial list from my memory, and I absolutely guarantee that there are many more names that I could add to it if I did a quick Google search.

Why this rotten track record? Well, for starters, nobody really knows exactly what happens as part of AD. Sure, amyloid plaques seem to be involved somehow, but nobody really has proven definitively if they are a symptom or causative agent. Likewise, the action and involvement of tau proteins seems significant, but there is no established pathology of the disease.

What that all means is that drug developers do not have a clear target. Imagine if somebody handed you a bow and arrow, pointed to a dense patch of forest, said "there's a small rabbit in there somewhere ... get me a bullseye". If you managed to so much as wing the critter, it would be basically blind luck - and I am going to argue that the existence of Namenda and Aricept is basically just a product of blind luck (try enough compounds and something might work).

Now, companies have developed successful drugs in the past without fully understanding the underlying mechanisms (Lunacept, for instance), but clearly that has not worked so well for AD.

Unfortunately, more disappointment is likely. Pfizer and JNJ have bapineuzumab in late studies, but the data on improved mental function has not been supportive. Likewise, Elan (NYSE: ELN) is pushing on with ELND005 even though the interim analysis was not positive. All of these, including LLY's other late-stage AD drug, solanezumab, target lowering amyloid levels and it just does not seem like that is a credible approach for great success.

What about targeting tau? This seems a little more encouraging. Tau protein seems to be involved in forming neurofibrillary tangles and animal models of tau inhibition seem to show positive results. Bristol Myers (NYSE: BMY) has a drug developed along these lines. Likewise, TauRX's Rember is a tau-targeting hsp70 inhibitor that appears to help mental function ... though it does require high doses. Early-stage Oligomerix is also trying to develop a drug that targets tau proteins, but they are very early in development.

Outside of this is Baxter (NYSE: BAX) and its Gammagard product. This has shown some cognitive improvement in Phase 2 studies, as well as less swelling of the brain - an encouraging enough sign to continue, but not really indicative of a major blockbuster cure.

I certainly do not mean to bash any companies working on AD drugs. It is a terrible disease and I really do hope somebody finds a compound that can halt or reverse its effects. That said, I think the idea of casting around blindly for compounds that may work and hanging on to apparently disproven notions (like that reducing amyloid helps much) is not helping anybody.

For investors, just remember to be skeptical. If you find a pharmaceutical or biotech with a truly novel approach to AD, maybe it is worth a shot in your portfolio, but I would advise a lot of skepticism when it comes this space as a whole. Until scientists figure out the "how", I just do not have much confidence that Big Pharma will figure out the "what".