Elan Becomes a Bad News Buyhttp://www.fool.com/investing/high-growth/2008/08/01/elan-becomes-a-bad-news-buy.aspx Brian Lawler
August 1, 2008
Never try to catch a falling knife, right? Wrong.
Yesterday, Elan (NYSE: ELN ) and partner Biogen Idec (Nasdaq: BIIB ) announced that they'd found two new cases of a rare and often deadly brain disorder in patients using their multiple sclerosis drug Tysabri. Elan's shares have subsequently fallen more than 45% today as I write this. But in this Fool's opinion, that precipitous drop has plunged Elan shares firmly into "buy" territory.
Let me put things bluntly: Shares of Elan are now undervalued. I could run you through the different discounted cash flow and other models I used to make that call, but they don't play well in such a short article. Fortunately, there's a simpler way to look at this situation.