Shares in Elan steadied yesterday as investors took the view that it was too early to write off its multiple sclerosis treatment, Tysabri.
But analysts warned that an information vacuum lasting two to three months is in store as Elan sets about trying to determine if there is a link between Tysabri and PML, the rare disease of the central nervous system that caused the death of one of the patients in its clinical trials.
Meanwhile, Elan's chief executive Kelly Martin said there would be no job losses in the Republic following the suspension of Tysabri sales on Monday.
The move will have no impact on its facility in Athlone, where the company employs 520 people, while Elan will continue with plans to recruit a further 60 workers, he said.
Despite falling by more than 20 per cent to a low of €5.00 in early trade, shares in Elan stabilised in the afternoon. In Dublin, they closed 19 cent or 3 per cent lower at €6.30 while in New York, its main market, they closed 3 cent lower, or 0.38 per cent, at $7.97 (€6.04). Many analysts believe that Tysabri will eventually make it back to the market but with diminished sales potential.
According to US broker Smith Barney, which raised Elan to a "hold" from a "sell" yesterday on the basis that Monday's share price collapse was overdone, Tysabri has a 75 per cent chance of a return to the market. But any return is likely to take longer than anticipated - with some observers talking about a period of one to two years - and seems set to involve a more restrictive label than currently applies. The drug, which analysts believed had the potential to capture up to 40 per cent of the $8 billion global MS market, would then do well to win less than half that figure.
According to Mr David Marshall of NCB Stockbrokers, the most positive case would see Tysabri back on the market in six months. It could then take a 17 per cent market share at peak, putting a value of $15 to $19 on the shares if the drug also gets approval for the treatment of Crohn's disease.
At the other extreme, if Tysabri has be to abandoned, the shares would be worth between $4 and $6, he said. Most brokers are advising investors with Elan shares to hold them until there is greater clarity.
Separately, Moodys has added its voice to those saying Elan does not face a cash crunch in the forseeable future. Yesterday it affirmed the rating on around $1.8 billion of Elan's debt although it has revised the rating outlook on the debt to negative from stable.
"Moody's does not believe Elan faces a near-term default on its debt obligations and the ratings are not being lowered at this time," the agency said, pointing to Elan's cash balances of $1.5 billion.
