Drug stocks can be volatile. Chart squiggles will rise and fall on unpredictable events like FDA approvals, fresh phase 3 trial data, or sudden outbreaks of deadly drug reactions. But Mr. Market eventually takes his Valium and settles down. That's the case with Motley Fool Rule Breakers recommendation and drug developer Elan
Elan gets more than half its revenue from the field of multiple sclerosis, through the powerful but risky MS medication Tysabri that it markets alongside American partner Biogen Idec
I've had a longstanding interest in MS because of family friends who have long suffered from the disease. Traditional therapies like Teva Pharmaceutical Industries'
And it's been a rocky ride ever since. Elan's stock has melted down to $3 and change, and then soared to $35. The PML cases have been dropping in regularly since Tysabri returned to market, but investors don't spook as easily anymore:
PML Report Date |
Elan Change |
Biogen Change |
---|---|---|
July 31, 2008 |
(50.5%) |
(28.3%) |
Oct. 29, 2008 |
(11.1%) |
(3.9%) |
Dec. 15, 2008 |
(3.6%) |
6.4% |
Feb. 6, 2009 |
4.3% |
(0.6%) |
April 17, 2009 |
(6.2%) |
(3.5%) |
May 22, 2009 |
(0.4%) |
1.7% |
June 12, 2009 |
(6.9%) |
(2.3%) |
June 19, 2009 |
(4.6%) |
(5.0%) |
June 26, 2009 |
(5.6%) |
(5.5%) |
Sept. 16, 2009 |
(2.3%) |
(2.1%) |
Market data from Yahoo! Finance, showing next-day share price change after each PML event report.
There have been 13 Tysabri-related PML cases since the reintroduction -- including three new cases in the Sept. 16 announcement -- but that's a vanishingly small portion of the more than 40,000 patients who take Tysabri worldwide. Investors have started to take these announcements in stride, because they don't appear to pose any long-term threat to the Tysabri business.
I've got a somewhat unique view of Elan: As a longtime Elan investor, I've poked and prodded the business model behind the medicine. Then -- irony of ironies -- I got the dreaded MS diagnosis this year and studied up on all forms of MS medication. My Copaxone isn't helping much, and Tysabri might be the next step.
Tysabri won't be Elan's golden goose forever, of course. There are enough MS patients to justify lots of research, and there are promising new therapies on the way from Teva, sanofi-aventis
And that's why I'm holding on to my shares, despite that string of PML incidents.
Agree? Disagree? Let me know in the comments section below.