A "dear doctor" letter can be almost as bad as a "Dear John."
The potential for adverse events with Tysabri is a sensitive subject. The drug was pulled from the market after only a few months of sales in early 2005, after two Tysabri patients (and later a third) were found to have different, potentially life-threatening side effects in conjunction with their use of the drug.
After an extremely long delay, the FDA allowed the drug back onto the market in 2006, this time with a strict label and risk-management plan. The new labeling changes by Biogen and Elan warn about the potential for "clinically significant liver injury" in some patients taking Tysabri.
Other multiple sclerosis drugs, like Biogen's Avonex and Pfizer's
The new safety issues with Tysabri highlight what has always been my concern about Elan's premium-priced valuation and its two most important drugs. Nobody knows what other long-term safety issues could pop up with Tysabri, or what the safety and efficacy results are for its lead-pipeline Alzheimer's treatment. This is why I've called Biogen and Elan's forecast of 100,000 patients on the drug by 2011 optimistic, and Elan's more than $10 billion valuation excessive. (Then again, I've been calling Elan's valuation excessive since it was trading in the $15-a-share range.)
Given its numerous products, Biogen will be fine even with the new liver warnings on the Tysabri label. And even if Tysabri’s sales growth decelerates, it will still be a very valuable drug for both companies. That leaves one big question, though: Will Tysabri be enough to make Elan a worthy investment?
More Foolishness about MS drugs: