Share Name Share Symbol Market Type Share ISIN Share Description
Eland Oil & Gas Plc LSE:ELA London Ordinary Share GB00B8HHWX64 ORD 10P
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.0% 165.80 0.00 01:00:00
Bid Price Offer Price High Price Low Price Open Price
165.60 165.80 0.00 0.00 0.00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Oil & Gas Producers 132.65 60.81 21.96 7.3 359
Last Trade Time Trade Type Trade Size Trade Price Currency
- O 0 165.80 GBX

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Eland Oil & Gas Daily Update: Eland Oil & Gas Plc is listed in the Oil & Gas Producers sector of the London Stock Exchange with ticker ELA. The last closing price for Eland Oil & Gas was 165.80p.
Eland Oil & Gas Plc has a 4 week average price of 0p and a 12 week average price of 0p.
The 1 year high share price is 166p while the 1 year low share price is currently 115.40p.
There are currently 216,794,391 shares in issue and the average daily traded volume is 0 shares. The market capitalisation of Eland Oil & Gas Plc is £359,445,100.28.
jbfnfn: Is this a fair offer? Anyone a view on the price 166p? Ok it's the usual 30% takeover premium to the low 120s price for the last few months. But the management were buying back shares in the low 120s (addmittedly not enough to shift the price). Presumably the management thought they were significantly undervalued in the low 120s. Interim statement from June 2019 positive. A second oil field and the prospect of a first pure exploration well. I have a small holding here. I thought I'd found a decently run outfit with some good prospects. I was hoping for a much higher share price than 166p a few years down the road. Now the chance is gone.
lukmanpatel: Another troll by the username lsehotdealz haha, share price is stagnant and there’s talks of fundraise at 10p on that board lol desperation has lead to going round posting on different board to prevent share price from dropping, usually ud stay quiet and average down and accumulate if you see huge potential lmaoo he’s spamming all the boards and a newly registered today as a member lol
alotto: I was expecting a movement in the share price today...
podgyted: Eland got into the AIM 50 because of it's recent share price performance and the liquidation of Pattiserie Valerie (CAKE) therefore a slot became available. Recent Buyback activity suggests Eland will buy at 125p or lower, theoretically giving a floor to the share price. They said they started the Buybacks because the shares were cheap (then @108p). IMO they are still cheap at 125p. That better?
alotto: awise what does that imply? that the market cap has gone up due to the latest share price hike?
podgyted: Share Buyback. 19th Nov 2018: "Eland Oil & Gas PLC (AIM:ELA), an oil & gas production and development company operating in West Africa with an initial focus on Nigeria, announces that it intends to commence a share buyback programme for a maximum aggregate consideration of up to £3.0 million (the "Programme"). The Board believes that the current share price substantially undervalues the Company's assets, the performance of the business to date, and its prospects. The Company's robust balance sheet provides the opportunity to take advantage of prevailing market conditions to repurchase shares at advantageous levels." So far 1,007,220 shares have been purchased for £1,100,044 (avg 109p). 487,135 were bought in Nov for £530,194 (avg 109p) 469,679 were bought in Dec for £507,724 (avg 108p) 50,406 have so far been bought in Jan for £62,126 (avg 123p) From 20/11/18 to 13/12/18 shares were bought on every working day then stopped - not sure if for closed period or other reasons. On 14/1/19 purchases restarted - data does not include 18/1/19 which may be reported Monday or may not have had any purchases due to 5 day 5% rule (Friday close 129)
podgyted: "Eland Oil & Gas PLC (AIM:ELA), an oil & gas production and development company operating in West Africa with an initial focus on Nigeria, announces that it intends to commence a share buyback programme for a maximum aggregate consideration of up to £3.0 million (the "Programme"). The Board believes that the current share price substantially undervalues the Company's assets, the performance of the business to date, and its prospects. The Company's robust balance sheet provides the opportunity to take advantage of prevailing market conditions to repurchase shares at advantageous levels."
cartonet: Dear Subscriber, This is a weekly insight of news and events in the Power, Oil and Gas industry in Nigeria and around the world. This roundup is for the week ended August 24, 2018. If you are an Oil and Gas Investor or stakeholder then this Newsletter is tailor-made for you. You can also subscribe to our other Newsletters and have some of the best insights from the world of investing in Nigeria, straight in your mailbox. We also love feedback, so, do send us some as we continue to make this Newsletter informative and useful to you our subscribers. Cloud of darkness on Oil blocks renewal In an earlier newsletter, we discussed the pending renewal of a number of upstream leases in 2017/2018. The renewal of assets is a risk for oil and gas operators as they could be revoked or approval gets delayed despite the assurances the Petroleum Act offers. The Petroleum Act describes the conditions to qualify for asset renewal which includes payment of outstanding royalty debts and liabilities to the government. Recently, the Directorate of Petroleum Resources (DPR), the agency charged with administering licenses and directly under the supervision of the Minister of Petroleum has reported earnings of $1 Billion from the renewal of Oil Mining Leases (OMLs) and Oil Prospecting Licenses (OPLs) in 2017. The details of the assets renewed, amount received, and owners of the renewed leases are unavailable. The syndicated press release by DPR was decidedly ambiguous and incoherent. Malfeasance thrives in darkness. Did all the companies meet the prescribed criteria? Were there any change is asset sizes? Were the renewal fees the best the country can get? Many questions, no answers. DPR even brushed away questions from the House of Representatives. The industry grows with transparency, with public information on renewed assets, businesses, SMEs, financial institutions, NGOs and the public at large can make better decisions, and the industry thrives. Katsina Refinery: Delay or Denial A few weeks ago, we outlined our thoughts on the feasibility of the Katsina refinery and Niger pipeline project. Our analysis suggested the project may be feasible given the economics of the upstream company driving the project. We may have missed a few things there because the company in question, Savannah Petroleum has now signed an ‘early production agreement’ with the Nigerien government to use the Chinese built Soraz refinery. This is only a few weeks after the same Nigerien government signed a Memorandum of Understanding (MoU) with its Nigerian counterpart. From our analysis, this may be a temporary setback for the Katsina refinery given the limited size of the Soraz refinery, Savannah Petroleum has seen stunning success in its exploration activities in Niger recently prompting the decision to fast-track development. Katsina might work if Soraz cannot handle increased capacity, but then the Chinese might just expand to accommodate increased production capacity. We will be watching developments on this. Seplat – The Gas and Oil Company Seplat Petroleum is transforming to a gas company with some oil. Since acquiring Shell’s stake in some Western Niger Delta assets, the company has blossomed from an upstart to a thriving, result-oriented business, continuously delivering value to stakeholders. Becoming a gas company may have been by circumstance as the assets they have acquired have mostly been gas rich but they have doubled down, developing a reputation for quick project delivery. It’s a peculiarly integrated and diversified indigenous company with a balance of upstream oil, upstream gas and midstream gas portfolios. The company has moved eastward of its current base as it seeks to develop the Assa North Ohaji (ANOH) gas-rich fields. Assa North is actually owned by Shell/NNPC while Ohaji South is owned by Seplat/NNPC (bought Chevron’s stake). Before Seplat’s acquisition of Chevron’s stake in Ohaji South, Shell was designated to develop midstream facilities for ANOH but they slept on it. With Seplat, the sprightly and more ambitious company in play, they were better positioned. Now, it’s going to develop ANOH’s 300 mscf/d processing facility with NNPC’s subsidiary, Nigerian Gas Processing and Transportation Company via a wholly midstream vehicle. Seplat’s midstream strategy is curated to take advantage of tax benefits. With ANOH and potential future expansion, a central processing facility (CPF) is being established in the east, a critical thrust of the 2008 Gas Master Plan. Location is very ideal too as it is proximous to the 42 inches Oben – Obiafu/Obikrom interconnector pipeline. We assume the completion of the OB-OB3 is a conditions precedent for the ANOH project. Overall, the ANOH project provides a huge benefit to everyone – domestic gas market, Seplat, NNPC, FIRS. Eland Oil – Rising Star UK headquartered Eland Oil is top contender for our Independent Oil Company of the year. Its meteoric rise in the last 12 months is unrivalled in the industry. A successful 4 well campaign has given rise to 100% increase in oil production (from 12,000 bopd to 23,000 bopd), alternative evacuation options have been secured, OPEX significantly reduced above peer facility uptime recorded and to top it an 80% increase in share price on the London AIM. An investment of $1 Million in March 2017 would have yielded $1.8 Million within one year. Exceptional performance, by any standard. Its future is bright. Improved cashflow has given the company headroom to pursue the development of Ubima field, a farmed-In marginal field owned by All Grace Energy Limited. With Gbetiokun and Ubima fields in the horizon, Eland is positioned to accelerate beyond its peer companies in the nearest future. NB: Professor Adebulugbe, a former Special Adviser on Energy to President Obasanjo is the public face of All Grace Energy Limited, the owner of the Ubima field. An Encore on the broken power market We are publishing again our recent commentary on the current broken power market Never in our history have we witnessed the current public mudslinging between private operators and government. A frustrated Minister of Power launched a public tirade against the DISCos (Electricity Distribution Companies) perceived inefficiencies and the Discos replied with a very uncomplimentary published statement. As this newsletter has warned repeatedly in the past, the power market is significantly broken. Broken beyond normal repair, hence the frustration on both sides as solutions seem remote and beyond the parties. Yes, the solution is beyond the Power Minister or the Discos. It’s with the President. The simple but key reason for the state of the market is lack of enforcement. Seems very simplistic but enforcement of the rules (of law) is the pivot on which economic prosperity or in this case a successful market stands. The problem of lack of meters, transformers etc. are ‘chicken and egg’ as investments would only follow an orderly and predictable market. Enforcement of contracts: Discos and Customers, Discos and NBET, NBET and GENCOS is the key to repairing the market but it takes a steely will from the top of the hierarchy to address the issue. Discos have poor revenue collection metrics because of managerial inadequacies and lack of consequence for stealing power or avoiding payments. The enforcement of the contract between the DISCo and customers is an onerous job but very critical to the health of the market. The President needs to consider this seemingly simple issue as a priority, emphasizing to the nation the importance of payments, rallying round law enforcement and penalties on government-owned agencies and individual customers. What is a market if the rules cannot be enforced? And enforcement is sadly beyond the Minister of Power of Disco’s capabilities. With enforcement of rules and contracts (fuel contracts, PPAs, Vesting Contracts, Transmission tariffs, MYTO) across the chain, losses will crystallize at the weak nodes. NBET may become insolvent, MYTO reviews may not be totally cost reflective but the process isolates the areas that now need interventions and temporary subsidies. The current process of throwing subsidies across the power value chain is creating a moral dilemma and perpetuating indiscipline. The World Bank which currently supports the power sector may attach conditionalities that encourage enforcement of rules in its future interventions. Without the rules, chaos beckons.
gersemi: Eland is primed for share price surge The company is focused on lifting output from Nigerian asset 27 April 2017 Great Ideas Issue: 27 Apr 2017 - Page 13 A material ramp up in output from Nigerian oil producer Eland Oil & Gas (ELA:AIM) over the next six months could act as a significant catalyst for its share price. The company’s main asset is the OML 40 licence onshore in Nigeria’s Niger Delta, in which it owns a 22.05% stake through its Elcrest Exploration and Production joint venture. It contains two fields, Opuama and Gbetiokun, with current proved and probable reserves of 83m barrels. Elcrest is estimated to owe Eland as much as $360m and until this sum is repaid Eland receives 100% of the cash flow from Elcrest’s 45% interest in OML 40. BIG PRODUCTION UPLIFT The plan is to boost production from OML 40 from a current 8,000 barrels of oil per day (bopd) to 17,500 bopd early in the second half of 2017 and 25,000 bopd around the turn of the year. This will partly be achieved through drilling a side-track on the Opuama-7 well (using a different hole or wellbore to gain access to the oil) for which the company is fully funded following a redetermination of its borrowing base. Eland has $9m left unused on its $24m lending facility and a current cash balance of $7.5m. It is also set to receive an $8.5m payment for its crude in the near-term. An extended shut down of the country’s Forcados oil terminal due to militant attacks has seen an alternative route to market developed, shipping crude using tankers. This solution has a maximum capacity of 20,000 bopd. Chief executive George Maxwell says the revenue from the oil minus the costs of getting it to market on the shipping solution is $12 per barrel at an oil price of $50 per barrel. That compares with $27 per barrel (revenue minus costs) if Forcados was operational. WHAT IS THE UPSIDE POTENTIAL? Canaccord Genuity values Eland at 40p based on the shipping option and 110p on Forcados coming back on stream. The company trades on 5.8 times forecast adjusted 2017 earnings per share falling to 3.1 times for 2018 when free cash flow of $26.3m is also pencilled in. From our point of view this more than prices in the significant security and political risks associated with operating in the Niger Delta. Maxwell set up Eland with Leslie Blair in 2009 and moved from the finance director role to replace Blair, who moved to an advisory role, as CEO in 2014. Both are former employees of Addax Petroleum, one of the few UK-listed success stories in Nigeria which was snapped up for $7.2bn by Chinese firm Sinopec in 2009. (TS) - Shares mag from April 2017
cat100: May 24, 2007 ACTION Buy Elan Corporation (ADR) (ELN) Return Potential: 31% Tysabri, tax losses and Bapineuzumab; initiating as a Buy Source of opportunity We initiate coverage of Elan as Buy with a 12-month price target of US$25/ADR. In our view, the value of Tysabri, the leveraging potential of the Alzheimer's Disease franchise and the value of the group's c.US$3 bn of utilizable tax losses are inadequately reflected in the shares. Despite near-term risks for Tysabri (new PML cases), in our view, the group's improved risk profile is under-appreciated by investors. As an alternative to buying the stock, our Credit Research team recommends buying longdated (2013) bonds which are more sensitive to Tysabri than the R&D pipeline, for yield. Our Options team also discusses derivatives strategies. Growth Returns * Multiple Volatility Volatility Multiple Returns * Growth Investment Profile: Elan Corporation (ADR) Low High Percentile 20th 40th 60th 80th 100th * Returns = Return on Capital For a complete description of the investment profile measures please refer to the disclosure section of this document. ELN Europe Biotechnology Peer Group Average Catalyst Continuing growth of Tysabri sales (in MS) should provide solid support for the shares, and if growth stays at current levels, could push the stock higher. US and/or EU approvals for Tysabri in Crohn's Disease are potential catalysts before year-end. Phase II Bapineuzumab data (30- patient PET scan study) could be a significant catalyst if positive, as could a sub part E filing for Bapineuzumab in the US. Valuation Using our risk-adjusted DCF valuation methodology, we calculate a 12- month price target of US$25/ADR; this implies a technology value of US$27.40/ADR. Should Tysabri be approved in Crohn's Disease, it could add up to US$4/ADR to our price target. Key risks The main near-term risk to our price target and view is an increase in cases of PML reported with Tysabri. In this scenario, we would view the risk of another product withdrawal as low, unless there were a significant number of new cases. However, we would expect acute share price weakness if any cases are reported. Elan also has product development risks, in common with other biotech companies. EXPECTED NEWS FLOW/EVENTS DATE EVENT COMMENT Mid-2007 EU approval for Tysabri in Crohn's Disease Expect a positive share price reaction October 2007 US approval for Tysabri in Crohn's Disease Expect a positive share price reaction 2H2007 Potential phase II data from PET scan study with Bapineuzumab Likely a significant catalyst, if positive 2H2007 Start of phase III trials with Bapineuzumab 1H2008 Full phase II data with Bapineuzumab Source: Company data, Goldman Sachs Research estimates The prices in the body of this report are based on the market close of 22 May 2007. We are initiating coverage of Elan with a Buy rating and 12-month price target of US$25/ADR. There are three key reasons for our optimism over Elan's outlook: • First, in our view, investors are underestimating the trajectory of Tysabri sales and the profit leverage to this for Elan. Although the appearance of new cases of progressive multi-focal leukoencephalopathy (PML) would be a negative for the stock, we view the likelihood of the withdrawal of the drug for a second time as highly unlikely. An approval in Crohn's Disease represents upside to our valuation. • Secondly, in our view, Bapineuzumab could potentially create a new paradigm for the treatment of Alzheimer's Disease; we view the supporting evidence for this approach as compelling. If successful, this could change the intrinsic and strategic outlook for Elan. • Lastly, we believe that investors are largely ignoring the group's US$2.8 bn of utilizable tax losses; should Elan embark on any strategic transaction in the future (either as an acquirer or as an acquisition target), the value of these tax losses would need to be taken into account when valuing the group Profitability from 2008 Using our proprietary risk-adjusted DCF valuation methodology, we calculate a 12-month price target of US$25/ADR. Should Tysabri gain an approval in Crohn's Disease, this could potentially add up to US$4/ADR to our valuation. On our estimates, the group will reach breakeven at the operating level in 2008 and profitability at the net income level in 2009. Once the group reaches profitability, tax-loss carry forwards of US$2.8 bn can be used to reduce any income tax burden. In our view, investors are overlooking the intrinsic and strategic value of these tax losses. Post the full utilization of these tax losses, the group's tax rate will be the Irish standard corporate tax rate of 12.5%; we view that as a competitive advantage relative to many other pharma and biotech companies. Risk of new PML cases with Tysabri are the greatest risk In our view, the largest near-term earnings and share price driver is the trajectory of Tysabri sales. Should this fall short of market expectations or slow significantly, it would be viewed negatively by investors and could impact our price target. Should any further cases of PML be reported, we would expect share price weakness. We view the risk that Tysabri could be withdrawn from the market as low, unless there were a significant number of PML cases over a short period of time, indicating that the rate of PML is significantly higher than currently anticipated. As with all development stage companies, R&D product delays or failures are a risk. Tysabri is the major near-term earnings driver We expect sales of Maxipime and Azactam to decline, due to expected generic competition, and believe that Prialt will remain a niche product. As such, revenues from Tysabri and Elan Drug Technologies are the main drivers of earnings, with Tysabri being the more significant contributor. We estimate that the breakeven point for Tysabri will be achieved May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 5 when 15,000 patients are on therapy (on an annualised basis). As there are now over 10,000 patients being treated, with another 2,500 enrolled in the TOUCH programme (a mandatory risk management programme for patients who are prescribed Tysabri) we are confident that Elan will reach the breakeven run rate before end-2007. Financial strengths and weaknesses The group is currently loss making. However, we forecast that it will reach breakeven at the operating level in 2008 and profitability at the net income level in 2009. The trajectory of the recovery in profitability is highly dependent on sales of Tysabri. We forecast that by 2010/2011, the launch of Bapineuzumab for Alzheimer's Disease will significantly lower the group's dependence on Tysabri. At the same time, on our estimates, Bapineuzumab will provide significant sale and earnings leverage. Company profile: A very focused approach to R&D Elan is a US$8.5 bn market value biopharmaceutical company based in Dublin, Ireland. It has been restructured and re-focused by a new management team following the end of off-balance sheet financing that led to significant divestments and restructuring from 2000. As the group restructured and re-focused after 2000, it was predominantly debt-funded. The group now has around US$700 mn in cash and US$1.7 bn in debt, though this does not mature until 2011-2013. The group now generates revenues from its Hospital Product/Specialty Product franchise, from Elan Drug Technologies and from sales of MS drug Tysabri. The group has also built a credible R&D pipeline presence, focusing on Autoimmune Diseases and Alzheimer's and Parkinson's Diseases. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 6 Valuation and financial outlook Risk-adjusted DCF valuation: 12-month price target US$25/ADR Using our proprietary risk-adjusted DCF valuation methodology, we calculate a 12-month price target of US$25/ADR. This is around 33% above the current share price. Our key valuation assumptions include: • Maxipime suffers generic competition in 2007, with a significant negative impact from 2008 • Azactam revenues continue to benefit from zero generic competition in 2007, but we assume generics enter the market during 2008 • We forecast peak sales for Prialt of US$32 mn • Revenues from Elan Drug Technologies (contract manufacturing and royalty income) continue to grow at double-digit rates, due to the launch of several new drugs that utilize Elan's drug delivery technologies. However, we assume lower profitability than in 2006 going forward • Tysabri revenues reach US$1.4 bn by 2011; we have not included sales in Crohn's Disease, however, if Tysabri is approved in this indication and reached peak sales of US$500 mn, it could add up to US$4/ADR to our valuation • SG&A cost increases remain relatively low in 2007-2010, providing significant profit leverage • The group reaches operating profit breakeven in 2008 and is profitable from 2009, although the trajectory of profit growth will depend in the near term on Tysabri revenues • Bapineuzumab is in phase III within the next 12 months, but could be submitted for approval under a sub part E filing in the US. We forecast a market launch in 2010 on the assumption that Elan and partner Wyeth will conduct a phase III safety (and efficacy) study regardless of whether it undertakes a sub part E filing for Bapineuzumab • We have assumed that there is no further debt re-scheduling (debt matures in 2011- 2013), although this is an option for the group • In line with our valuation methodology for other biotech companies, we use a discount rate of 11%. For products in development, this is effectively compounded up by the risk adjustments applied to each product at different stages of development. Arguably, however, using a discount rate of 11% to value those products already on the market is overly conservative Bapineuzumab and the R&D pipeline is a free option According to our estimates, the current share price is justified by Elan's existing businesses, without any value for Bapineuzumab and the R&D pipeline. The value of Maxipime, Azactam, Prialt, Elan Drug Technologies and Tysabri is US$16.3/ADR (US$18.6/ADR pre debt) on our estimates – not far from the current share price – though this is predicated mainly on Tysabri's sales trajectory being relatively conservative. On our estimates, there is little in the share price for the value of the R&D pipeline, including Bapineuzumab, and as such the R&D pipeline represents an almost free option. There are very low expectations, we believe, for a sub part E filing for Bapineuzumab. Therefore, should the drug not be filed under this designation in the coming 12 months, we would expect limited share price impact. However, if it is filed, we would expect a positive share price impact. In our view, the value of the tax losses is being overlooked As of end-2006, Elan had US$2.83 bn of tax-loss carry forwards. Of this amount, US$2.74 bn of tax-loss carry forwards do not expire for more than five years. In our view, the value of this asset (which amounts to around 31% of the group's current market value, if all tax losses could be utilized, on an NPV basis) is being undervalued by investors. Tysabri and PML; risk of more cases To date, there have been three cases of PML associated with Tysabri treatment, all where patients were treated with Tysabri in combination with other immunomodulatory drugs. Although the TOUCH programme should minimize the risk of PML cases in Tysabri-treated patients, as there is no way of predicting whether patients will develop PML, or which patients could develop the condition, the possibility of further cases of PML with Tysabri cannot be ruled out. In our view, unless there are a large number of cases over a short period of time, the risk that some cases of PML as a consequence of Tysabri treatment could lead to Tysabri being withdrawn from the market again are very low. Tysabri may not be approved in Crohn's Disease Tysabri has been submitted for approval for the treatment of Crohn's Disease in the US and Europe and regulatory decisions in both territories are expected before the end of 2007. Although we view the benefit/risk profile of Tysabri to be favourable in Crohn's Disease, regulatory authorities may view the risk of PML (however small) as too great for an approval in this condition. Competition is likely to increase in MS In our view, there is likely to be an increase in the number of therapy options in MS over the coming 4-5 years. These may include oral therapies, which could increase the pressure on existing MS treatments (including Tysabri) that are administered by either the intravenous or sub cutaneous route. However, in our view, the uptake of any emerging therapy, however it is administered, is likely to be driven by efficacy and safety and as such sales of incumbent MS drugs could be reasonably well protected. Biogen IDEC has MS programmes that may compete with Tysabri Elan's partner on Tysabri, Biogen IDEC, has several products in development that could compete with Tysabri. We remain confident that as long as Tysabri continues to meet expectations any potential competitive threat is manageable. Bapineuzumab or other development projects could fail We view Bapineuzumab as potentially a very valuable asset for Elan – if effective, it could be a new treatment paradigm in Alzheimer's Disease. Elan and partner Wyeth have recently announced that they plan to initiate a phase III study later in 2007, after discussions with regulators, despite the 240 patient phase II study not completing until 2008. Although we have a positive view on the likely outcome of the phase II study, without seeing efficacy data investors may remain skeptical and assume that there remains a risk that Bapineuzumab could fail. Further, as many of the Elan development programmes in Alzheimer's Disease target the accumulation of Aβ42, should this approach be shown to be ineffective, it could question the validity of several of Elan's development programmes. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 11 Currently marketed drugs and revenue streams Elan garners revenues from three main sources currently. These are: • Hospital/specialty products • Elan Drug Technologies • Tysabri/Elan Biopharmaceuticals Hospital/specialty products The current stable of marketed specialist hospital products is narrowly based and is only marketed in the US. The portfolio comprises two anti-bacterial drugs, Azactam and Maxipime, and the specialist intravenous pain-control drug Prialt. Azactam lost US patent protection in 2006, although as yet no generic version has been approved or launched in the US. Maxipime lost US patent protection in March 2007, although protection from formulation patents could potentially be extended into February 2008. The likelihood of generic versions of both Azactam and Maxipime being approved and launched may partly depend on the ease of manufacture of these drugs, both of which are produced partly by bacterial fermentation. Both drugs are supplied to Elan by Bristol Myers Squibb. Azactam Azactam (aztreonam) is a monobactam anti-bacterial, approved for the treatment of infections of the urinary tract, lower respiratory tract, skin and skin structures, intraabdominal area, gynaecological area and for septicaemia. Despite losing US patent protection in October 2005 no generic version of Azactam has been approved in the US. However, we forecast a decline in Azactam's revenues from 2007; if generics are not approved, this could prove premature. Maxipime Maxipime (cefepime hydrochloride) is a semi-synthetic broad spectrum cephalosporin anti-bacterial. It lost US patent protection in March 2007 and its supplier, BMS, has been informed by generic producer Apotex that Apotex plans to launch generic cefipime during 2007. As such, we forecast that sales of Maxipime will decline from around US$160 mn in 2006 to US$135 mn in 2007 and US$54 mn in 2008. Prialt Prialt is indicated for the treatment of chronic pain in patients for whom intrathecal (IT) therapy is warranted and who are intolerant or refractory to other treatments such as systemic analgesics, adjunctive therapy or IT morphine. Prialt was approved in the US on December 28, 2004. Prialt (ziconitide) is a synthetic peptide, equivalent to the 25-amino acid peptide from the marine snail Conus magnus. Although its mechanism of action in treating pain is not fully elucidated, there is strong evidence that Prialt works by blocking N-type calcium channels in Aδ and C-afferent nerves in the dorsal horn of the spinal cord. Blocking these calcium channels reduces excitatory neurotransmitter release, leading to anti-nociception. Elan sold European rights to Prialt to Eisai in March 2006. US sales of Prialt, even after a product re-launch, have remained low. 1Q2007 sales were US$1.6 mn. It is clear that although Prialt is effective, clinicians and patients view IT delivery of drugs as very much the last resort. As such, we expect sales of Prialt to remain modest and do not envisage that the drug will be a significant growth driver for the group. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 12 Potential for cost savings As Elan could lose the bulk of its revenues from its Hospital Products/Specialty pharma area in 2008, due to the expectation of generic competition for Maxipime and Azactam, this may present an opportunity to reduce the size of the sales and marketing effort in this area. However, part or all of this effort could be re-focused on the Tysabri opportunity. Elan has given no indication on whether any costs could or would be saved in this area. Elan Drug Technologies: A profitable stand-alone entity Elan Drug Technologies (EDT) focuses on product development (including novel drug delivery technology), scale-up and manufacturing, mainly for third parties. Elan receives royalties on sales of products formulated using its various drug delivery technologies, such as the NanoCrystal technology. The breadth of licensing of these technologies for a wide range of products shows their utility and potential value. Royalty-based revenues could be boosted by royalties on sales of recently launched drugs such as Emend (emesis, Merck & Co) and IVEGA (psychosis, JNJ), but are also increasing as a result of royalties on sales of already-marketed drugs such as Tricor (dyslipidaemia, Abbott) and Rapammune (transplant rejection, Wyeth) which continue to grow strongly. Although Elan's royalty on such products has not been disclosed and although it may vary by product, correlating end-market sales of Tricor and Elan's revenues suggest a royalty rate of 4.9%. Growth in newly launched and faster-growing products is likely to be offset by royalties from more mature revenue generators such as Theo-Dur, Avinza and Cardizem. In addition to the agreements covering the drugs listed in Exhibit 6, Elan has agreements for undisclosed products from Roche, sanofi aventis and Bristol Myers Squibb as well as with Abbott for a fixed dose combination of Tricor and AstraZeneca's Crestor. Elan has around 70 development programmes ongoing within Elan Drug Technologies Profitability has increased in recent years Elan's EDT business increased revenues by 28% in 2005 and by 9% in 2006, though 2006 benefited from a one-off gain from an arbitration settlement with King Pharmaceuticals. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 13 Hence, we envisage higher royalty and manufacturing income and lower contract revenues going forward, but do not forecast an operating margin at the same level as 2006. Exhibit 7: EDT gross revenues and profitability 2006 2005 2004 Revenues US$284.6 mn US$261.2 mn US$221.9 mn Operating profit US$69.1 mn US$47.6 mn US$43.6 mn Operating margin 24.3% 18.2% 19.6% Source: 20-F report. Tysabri and the autoimmune disease franchise Tysabri (natalizumab) is an IgG4κ monoclonal antibody directed against α4β1 and α4β7 integrins. Tysabri blocks the binding of VCAM-1 to α4β1 and MadCAM-1 to α4β7. This blocks the trafficking of lymphocytes in the gut and into the brain – hence the rationale for developing Tysabri for multiple sclerosis (MS) and Crohn's Disease. Tysabri was approved in the US on November 23, 2004 and withdrawn from the market on February 28, 2005 after three patients treated with Tysabri in addition to other immunomodulatory drugs developed a rare and potentially fatal condition, progressive multi-focal leukoencephalopathy (PML). Subsequently, Tysabri was approved by the FDA on June 5, 2006 for patients with RRMS, but with stringent monitoring of patients via the TOUCH programme. In Europe, Tysabri was approved on June 29, 2006 for patients that have either previously failed to respond to treatment with a β-interferon or whose RRMS is rapidly evolving. Elan developed Tysabri and will market the drug together with partner Biogen IDEC. Before Tysabri was removed from sale in early 2005, it had also been in development for Crohn's Disease and rheumatoid arthritis (RA). Given the risk of PML in a condition such as RA, which is not life threatening, Tysabri is no longer being investigated in this condition, although Elan and Biogen IDEC are continuing to pursue the Crohn's Disease indication. The TOUCH prescribing programme and the risk of PML From what can be ascertained from scientific and medical literature, there is no way to predict in which patients the JC virus is likely to be activated and subsequently cause PML. The activation of the JC virus can be caused by immunosuppression, but not all immunosuppressants cause PML. As a result of these uncertainties and with the agreement of the FDA, Elan and Biogen IDEC have a risk management programme in place, the TOUCH programme, to monitor Tysabri and the risk of PML. As part of the TOUCH programme, Tysabri now carries a prominent black box warning of the risk of PML. It also warns against the concurrent use of immunosuppressants with Tysabri, or the use of Tysabri in immunocompromised patients. The TOUCH programme requires mandatory enrollment for all clinicians who prescribe Tysabri, central pharmacies that wish to distribute Tysabri, infusion centres that want to infuse the drug and patients who wish to be prescribed Tysabri. There is also a controlled, centralized distribution network to enrolled infusion centres. There are mandatory educational materials for patients and clinicians, which include a patient medication guide and a monthly pre-infusion checklist. Clinicians are required to conduct an ongoing assessment of PML risk in their patients and to monitor overall safety. Elan and Biogen IDEC are also conducting a 5,000 patient cohort observational study over five years – the Tysabri Global Observation Program in Safety (TYGRIS). May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 14 The TOUCH risk management programme does not rule out the possibility that further cases of PML will be seen in patients treated with Tysabri. However, in our view it minimizes the risk of large numbers of Tysabri patients developing PML. Further, with careful management of patients on Tysabri, the prevalence of PML in the MS population may become apparent. Assuming this prevalence is not significantly higher than has been seen to date, we would not envisage any further restrictions on Tysabri's availability and we are very comfortable in this scenario that a second withdrawal of the product from the market is highly unlikely. Tysabri MS data Elan and Biogen IDEC conducted two registrational studies with Tysabri in MS; the AFFIRM monotherapy study and the SENTINEL study in combination with Biogen IDEC's Avonex. On the basis of the results after one year, the FDA approved Tysabri. Two and three year data have confirmed the efficacy seen at the one-year time point. AFFIRM and SENTINEL: Tysabri monotherapy and combination studies The AFFIRM study randomised 942 relapsing-remitting MS (RRMS) patients 2:1 to an intravenous infusion of 300mg Tysabri (n=627 patients) pr placebo (n=315 patients), once a month, for a planned 116 weeks. Both the AFFIRM and SENTINEL studies enrolled patients who had experienced at least one clinical relapse during the prior year and had an EDSS score between 0 and 5. The primary end-points of the study were: • Reduction in relapse rate • Slowing the progression of disability, based on a sustained improvement (of at least 12 weeks) in EDSS score – the Kurtzke Extended Disability Score – at two years The slowing of disability is defined as an increase in EDSS score of 1 point or greater from baseline if the score is 1 or higher, or an increase in EDSS score of 1.5 points or more from an EDSS baseline of zero. Secondary end-points of the study included: • Reduction in gadolinium-enhanced MRI brain lesions at one year • Reduction in the number of new or newly-enlarging T2 hyperintense MRI brain lesions • Slowing of disability progression as determined by MSFC • The proportion of patients relapse-free at one year The SENTINEL study randomised patients to Avonex (30 micrograms given intramuscularly once weekly) plus placebo, or to Avonex plus a once-monthly intravenous infusion of Tysabri (300mg). The data from both studies show a significant effect from Tysabri on MS disability and progression, alone and in combination with Avonex, Biogen's β-interferon. As Tysabri has not been trialed head-to-head with any of the β-interferons, it is not possible to evaluate comparable efficacy. However, Tysabri's efficacy in MS, in our view, is obvious. The size of the MS market opportunity is significant Existing drugs, mainly β-interferons, to treat MS achieved sales of US$5.5 bn in 2006 (up 7.6% year-on-year). These are outlined in Exhibit 10. Estimates of the number of MS patients vary, but in the US it is estimated that there are 266,000-400,000 patients, with approximately the same number outside the US in G8 countries. The prevalence of MS in the US according to the National MS Society is 135 per 100,000. We estimate that worldwide, around 400,000 MS patients are currently treated with existing medications. The remaining c.400,000 patients either elect not to be treated (early stage MS can have relatively mild symptoms) or have tried existing drugs and have quit, because of side effects, the need for frequent injections, or due to lack of efficacy. Patients not currently on therapy – for whatever reason – are likely to be focus of attention for Elan and Biogen IDEC and treatment of even a small proportion of these patients could expand Tysabri's sales – and the MS market in total – significantly. We estimate that the breakeven point for Tysabri is reached when 15,000 individuals are on treatment on an annualized basis. We do not forecast significant switching of patients from existing therapies to Tysabri (those patients whose MS is well controlled have less incentive to switch, especially to a higher priced therapy). However, over the coming year, the degree of switch to Tysabri will be more easily assessable. ysabri Crohn's Disease data Elan and Biogen IDEC submitted a Marketing Authorisation Application to the EMEA in September 2004 and since Tysabri's European approval for MS in 2006, discussions with the EMEA have begun again. A decision on Tysabri's approvability in Crohn's Disease is likely in Europe before the end of 2007. The companies submitted a supplemental BLA to the FDA for the Crohn's Disease indication on December 15, 2006 which could result in a response from the FDA by October this year. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 17 Elan and Biogen IDEC conducted three phase III studies in Crohn's Disease looking at induction and maintenance of remission. These were the ENACT-1 (induction), ENACT-2 (maintenance) and the confirmatory ENCORE (response and remission) study. Results have been published from these studies in peer-reviewed medical journals and at scientific meetings such as the Digestive Diseases Week conference. Results from the ENACT-1 study in 905 patients did not reach statistical significance at the primary end-point in the induction of remission, however, responders in this study (n=339) were enrolled in the ENACT-2 programme, in which results were statistically significant. Estimates from the Mayo Clinic suggest that there are around 500,000 patients with Crohn's Disease in the US alone. Current biological therapies for Crohn's Disease are the anti-TNFα drugs Remicade (JNJ) and Humira (Abbott). Cimzia (UCB), also an anti-TNFα product, is being reviewed by the FDA and could be approved either in 2007, or slightly later should additional clinical studies be required. Sales of these drugs in the Crohn's Disease indication are not disclosed (Remicade and Humira are also approved to treat RA and psoriasis). However, we estimate that Crohn's Disease represents well in excess of a US$1 bn opportunity, based on the sales and continuing growth of existing anti-TNFα drugs in this setting. Currently, we do not include Tysabri revenues from the Crohn's Disease indication in our model. However, should Tysabri be approved in this indication and gain a 10% share of the addressable US population at peak, this could add another US$4/ADRto our risk-adjusted DCF valuation. Elan and Biogen IDEC: the economics In general, Elan and Biogen IDEC share the development and commercialisation costs and profits on Tysabri. Biogen IDEC is responsible for manufacturing Tysabri, which it does at its RTP facility in the US, although Biogen IDEC is building a new facility at Hillerod in Denmark (due to be completed in 2009) that we believe may also be used to manufacture Tysabri. Elan is responsible for the sale and distribution of Tysabri in the US and Elan buys Tysabri from Biogen IDEC at a price that includes the cost of manufacturing plus Biogen IDEC's gross profit. In Europe, Biogen IDEC is responsible for Tysabri's distribution. Elan records revenue as its share of profit or loss on European sales of Tysabri in addition to any directly-incurred expenses on those sales. The net result of this arrangement is that both parties share the economics on Tysabri approximately equally. As part of the agreement, there are two milestone payments totaling up to US$125 mn that Elan could potentially make to Biogen IDEC: • First, if global end-market sales of Tysabri exceed US$125 mn per quarter, on average, for four calendar quarters, Elan has the option to pay Biogen IDEC a milestone payment of US$75 mn. Payment of this milestone would maintain Elan's share of Tysabri at approximately 50% for annual end-market sales above US$700 mn. Should Elan elect not pay the milestone payment, its share of Tysabri would decline to around 35% for annual global sales above US$700 mn. • Secondly, if global end-market sales of Tysabri exceed US$200 mn per quarter, on average, for four calendar quarters, Elan can opt to pay Biogen IDEC US$50 mn. Payment of this second milestone would maintain Elan's interest in Tysabri at approximately 50% on annual end-market sales above US$1.1 bn. Should Elan elect not to pay this second milestone, its share of Tysabri would decline to around 35% for annual global sales above US$1.1 bn. Should Elan pay the first, but not the second milestone, its share of Tysabri would decline to 35% on annual global sales above US$1.1 bn. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 18 Tysabri sales and patient numbers In 2006, Elan recorded net sales of Tysabri of US$28.2 mn in the US (global sales were US$38.1 mn) and negative revenue of -US$10.7 mn in Europe where the product was still being rolled out across various countries. In 1Q2007, Elan recorded net US sales of Tysabri of US$35.7 mn. Global sales reached US$48.4 mn, but with the impact of operating expenses in Europe for Elan, the group recorded a net -US$5 mn in revenue in Europe. Along with its 1Q2007 results, Elan highlighted that as of mid-April, 9,100 patients were being treated with Tysabri and that 12,500 patients had been enrolled in the TOUCH programme. The group's previous mention of Tysabri at its 2006 results announcement in February noted at that point 8,000 patients enrolled in the TOUCH programme and 5,000 patients on therapy. This suggests an approximate run rate of 1,200 new patients per month being enrolled for the Tysabri programme. Should this run rate remain constant for the remainder of 2007 (although it could accelerate given that Tysabri is still in the launch phase), that would imply over 19,000 patients potentially on drug by the end of 2007. This would mean an annualized run rate of global revenues for Tysabri of over US$550 mn (average price US$28,000 per annum) by end-2007. Competitive environment in MS; more biologics, but also oral drugs Currently, there are only five drugs approved for the treatment of RRMS. There are several biologics in development that may find a role in the treatment of MS and additionally there are several small molecules in late-stage development as well. In our view, the relative positioning of each drug will predominantly be determined by efficacy and safety as well as route and frequency of administration. As the majority of new agents in development are some way from completing pivotal efficacy studies, we do not envisage that the competitive landscape will change significantly – if at all – before 2011/2012. Exhibit 11: Drugs in development for MS Significant potential launches not expected until 2011+ Drug Company Stage of development Administration Cladribine Merck KGAa Phase III Oral Teriflunomide sanofi aventis Phase III Oral FTY-720 Novartis Phase III Oral BG-12 Biogen IDEC Phase III Oral MBP 8298 BIOMS Phase II/III Intravenous Rituxan Biogen IDEC/Genentech Phase II/III Intravenous CAMPATH Genzyme/Bayer Phase II/III Intravenous Daclizumab Biogen IDEC/PDLI Phase II Intravenous CDP323 Biogen IDEC/UCB Phase II Oral ELND-001 Elan Phase II Oral RTL1000 Artielle ImmunoTherapeutics Phase I Intravenous Source: Company announcements,, Pharmaprojects Earlier stage autoimmune disease products in development Elan has two small molecule follow-ups to Tysabri that could potentially compete with Tysabri in MS in due course. Assuming the PML side effect is specific to Tsyabri and not to the drug's mechanism of action, these could be used in other chronic conditions such as rheumatoid arthritis. In this vein, Elan has ELND-001 and ELND-002, both α4β1 and α4β7 integrin inhibitors in phase I and pre-clinical development for undisclosed indications, respectively. The group also has an early stage MS programme, although no details have been provided on this. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 19 R&D pipeline: Neurodegenerative and autoimmune disease focus Elan has a relatively broad R&D pipeline, especially with its Alzheimer's Disease programmes. In our view, this is a facet of Elan that investors do not fully appreciate and is therefore not fully reflected in the group's current valuation. On our estimates, Bapineuzumab should be in phase III trials within the next year and Eli Lilly's LY-450139, where Elan has the right to opt-in to participate in sales and marketing, should also be in phase III. These aside, on our estimates, Elan could have another three drugs in phase II development within the next 12 months. Exhibit 12: Elan R&D pipeline +1 year Indication Drug Mechanism of action Partner Pre-clinical Phase I Phase II Phase III Registration Launched Autoimmune diseas e Crohn 's Disease Tysabri α4β1, α4β7 integrin inhibitor Biogen IDEC RA, autoimmune diseases ELND-001 Oral α4 integrin inhibitor Autoimmune diseases ELN-D002 Oral α4 integrin inhibitor MS programme ND Unknown Neurodegenerative diseas e Alzheimer's Disease Bapineu zumab Anti-Aβ42 antibod y Wyeth Alzheimer's Disease AAC-001 Anti-Aβ42 antibod y conjuga te Wyeth Alzheimer's Disease AAB-002 Anti-Aβ42 antibod y Wyeth Alzheimer's Disease LY-45013 9 γ secretase inhibitor Eli Lilly Alzheimer's Disease ND γ secretase inhibitor Alzheimer's Disease ELND-005 Anti-Aβ42 Transition Therapeu tics Alzheimer's Disease ND β secretase inhibitor Parkinson's Disease ND Unknown Source: Goldman Sachs Research estimates. Elan ranks highly on the GS R&D Risk Index We analyse the risk profile of biotech R&D pipelines using various cuts of our proprietary R&D Risk Index. This analysis excludes marketed products, focusing solely on R&D pipeline risk rather than overall company risk (arguably, companies such as Elan that also generate revenues from selling marketed drugs have an overall risk profile which is lower than those companies which do not have marketed products). We use the GS R&D Risk Index as a tool to evaluate companies. This is a relative index – those companies ranking below their peers have higher risk and/or lower commercial potential in their R&D pipelines. • In the basic cut of the GS R&D Risk Index which measures the current number of products and their stage of development, Elan ranks sixth of 31 European biotech companies. • Looking forward one year, we forecast that Elan will rank fifth of 31 European biotech peers. This means that we forecast that Elan's R&D pipeline will advance faster than the majority of its biotech peers over the coming 12 months. • When the Index is ranked by end-market the peak sales potential of each drug in development, Elan ranks third of 31. This suggests that in addition to its R&D pipeline May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 20 being of relatively lower risk than those of the majority of its European biotech peers, its pipeline also has relatively greater commercial potential. • Finally, weighting the Index by revenues per product that each biotech company is expected to generate (which takes into account different commercialisation strategies, e.g. companies which sell their own drugs versus companies that may develop a blockbuster but license it out in return for a low royalty on sales), sees Elan rank third out of 31 companies. This suggests that in addition to having an R&D pipeline that is of relatively lower risk than those of its peers and with greater commercial potential, Elan is able to retain a greater proportion of the revenues likely to be generated from its R&D pipeline products than the majority of its peers. Exhibit 13: R&D Risk Index 2008E Weighted by end-market sales per product Exhibit 14: R&D Risk Index 2008E Weighted by biotech company revenues per product 0 5000 10000 15000 20000 25000 30000 35000 MorphoSys Ardana Transgene Bavarian Nordic Oxford BioMedica BioXell Paion Antisoma Ark Therapeutics Vectura Jerini Karo Bio Alizyme Crucell NeuroSearch Speedel Pharming NicOx Zeltia Acambis MediGene Arpida Biovitrum Vernalis Intercell GPC Biotech Basilea Renovo Elan Actelion Genmab Median Mean Lower risk pipeline; higher commercial potential 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 MorphoSys Transgene Ardana Oxford BioMedica Antisoma Karo Bio Vectura BioXell Paion Ark Therapeutics NeuroSearch Alizyme Bavarian Nordic Crucell Jerini Pharming Speedel NicOx MediGene Vernalis Arpida Acambis Biovitrum Zeltia Intercell Renovo GPC Biotech Basilea Elan Genmab Actelion Median Mean Lower risk pipeline; higher commercial potential Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates. GS R&D Risk Index methodology We have three ways of looking at the R&D risk profile of each company: • The GS R&D Risk Index currently and forecast one year ahead. • The Index weighted by end-market sales per product. • The Index weighted by biotech company revenues per product. The GS R&D Risk Index First, we objectively analyse the R&D pipeline and give each product a value, depending on its stage of development. This is the R&D Risk Index. We have weighted each product depending on our assessment of its probability of reaching the market. This is the same methodology which we use in our risk-adjusted DCF valuations. The sum of all the product values for each company is used to rank the companies. Companies with lower overall risk R&D pipelines have higher values. The probabilities and points ascribed are summarized in Exhibits 15 and 16. Index weighted by end-market sales Secondly, we take the R&D Risk Index and adjust it for end-market revenues which we forecast for each drug. The reason for this adjustment is to reflect value risk as well as volume risk: at the extreme, a company may have a high R&D Risk Index value (which May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 21 indicates lower risk pipeline), but this may comprise a multitude of potential drugs with low commercial value. Index weighted by biotech company revenues Thirdly, we take the R&D Risk Index and weight it by the revenues on each product which the biotech company will receive. This reflects the fact that most biotech companies out-license their drugs to third parties for marketing. As a result, they receive only a proportion of the end-market sales as a royalty or profit share. Exhibit 15: Probabilities of success during and at the end of each stage of development Development stage Probability of success when at this stage Probability of success at the end of this stage Research 0.1% 1% Pre-clinical 1% 5% Phase I 5% 10% Phase II 10% 25/50% Phase III 25/50% 75% Registration/approval 75% 100% Source: Goldman Sachs Research estimates. Exhibit 16: R&D Risk Index values during and at the end of each stage of development Development stage Probability of success when at this stage Probability of success at the end of this stage Research 0.01 0.1 Pre-clinical 0.1 0.5 Phase I 0.5 1.0 Phase II 1.0 2.5/5.0 Phase III 2.5/5.0 7.5 Registration/approval 7.5 10.0 Source: Goldman Sachs Research estimates. May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 22 Bapineuzumab: the potential for leveraged surprise upside Bapineuzumab (AAB-001) is a monoclonal antibody that binds to amyloid-beta (1-42) – also known as Aβ42. It is being developed as a treatment for Alzheimer's Disease by Elan and partner Wyeth on a 50-50 cost and profit-share basis. It is being investigated in two phase II studies and although data from these are not due until 2008, the companies have announced their intention to begin a phase III trial before the end of 2007, after the completion of discussions with regulatory authorities. In our view, if Bapineuzumab is effective, it will cause a paradigm shift in how Alzheimer's Disease is treated. Given the size of the addressable market, success in this indication would add significantly to Elan's sales and profit base: hence this is a highly leveraged opportunity. The β-amyloid hypothesis and evidence There is increasing evidence that over-production and accumulation of the 42-amino acid peptide β-amyloid (Aβ42) is central to the pathogenesis of Alzheimer's Disease. Hence, strategies to halt the production of Aβ42 or to reduce its ability to aggregate in the brain would appear to be valid strategies for the treatment of this condition. A summary of the experimental and clinical evidence for Aβ42's role in Alzheimer's Disease is given below. Exhibit 17: Bapineuzumab and the amyloid hypothesis Bapineuzumab binds to Aβ42 and may inhibit or reverse plaque formation Aβ Aβ Aβ deposits APP Y Aβ42 Aβ42 plaques Alzheimer's Disease Bapineuzumab Source: Goldman Sachs Research estimates. Pre-clinical evidence There is a wealth of evidence implicating the role of Aβ42 in animal models of Alzheimer's Disease, although in our view the evidence has to be viewed in its entirety i.e. together with clinical evidence, before it becomes compelling. • Increased expression of Aβ42 in cells leads to increased apoptosis • Transgenic mouse models of Alzheimer's Disease which over-express APP, result in brain plaques similar to those seen in humans with Alzheimer's Disease; these mice have concomitant learning and memory deficits • Immunisation against β-amyloid prevents synaptic degeneration in a mouse model of Alzheimer's Disease and increases cognition May 24, 2007 Elan Corporation (ADR) (ELN) Goldman Sachs Global Investment Research 23 • Inhibition of β-amyloid aggregation by cyclohexanehexol reverses the Alzheimer's phenotype in a mouse model • Inhibition of β-secretase and γ-secretase, enzymes that cleave APP to produce β- amyloid, reduce β-amyloid deposition in animal models • Treatment of mice with Bapineuzumab in an Alzheimer's mouse model reduces brain plaque burden Clinical evidence There is a growing body of clinical evidence from post mortem data on Alzheimer's Disease patients and from genetic studies which suggests a casual relationship between Aβ42 and Alzheimer's Disease. • Mutations in the amyloid precursor protein (APP, which is metabolized to Aβ42) lead to early-onset Alzheimer's Disease; all known mutations in APP lead to increased production of Aβ42 • Evidence from post mortem brains from Alzheimer's Disease patients show significantly increased levels of β-amyloid relative to brains from patients without Alzheimer's Disease; Alzheimer's patients have greater progressive synaptic loss, gliosis and neurofibrillary tangles • Patients with trisomy 21 (Down's Syndrome) have three copies of the APP gene and if the patients survive through to mid-life, they develop a neuropathology similar to Alzheimer's Disease • The apolipoprotein Eέ4 genotype, which is a significant risk factor for Alzheimer's Disease, leads to an acceleration of amyloid deposition in human brains The AN-1792 evidence Elan had previously trialed a drug called AN-1792 in Alzheimer's Disease. AN-1792 was an active vaccination strategy against Aβ42. It comprised aggregated Aβ42 protein, together with an adjuvant, QS-21. The idea was to stimulate an active immune response against Aβ42, such that Aβ42 would be naturally reduced in the brains of Alzheimer's Disease patients. However, the randomised, placebo-controlled clinical study (trial 201) was stopped early due to the occurrence of meningoencephalitis in 18 of 300 (6%) Alzheimer's patients in the study. As no efficacy data had been generated up to that point, there was no option but to curtail the study. However, patients in the study have been followed and data from the study after four and a half years is available, as is post mortem data. The data at 4.5 years showed that in the pre-specified high antibody titre group, 35% of patients treated with AN-1792 were living at home with need for limited care versus 5% of placebo-treated patients. This was statistically significant (p=0.04). Further, AN-1792 treated patients in the high titre group had a statistically significant increase in All Memory scores (p=0.009). Additionally, patients treated with AN-1792 showed a slowing of the decline in Disability Assessment of Dementia Score (DAD, p
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