BioWorld International Correspondent

DUBLIN, Ireland - Confirmation of a second case of progressive multifocal leukoencephalopathy (PML) among the 1,171 multiple sclerosis patients receiving Tysabri (natalizumab) in combination with Avonex (interferon beta-1a) sent shares of Elan Corp. plc and Biogen Idec Inc. further downward last Friday.

Dublin-based Elan ended the week at $5.71, down almost 79 percent from the previous week's close of $26.90, while Cambridge, Mass.-based Biogen Idec dropped just more than 44 percent during the same period, from $67.28 to $37.53, following the disclosure of two adverse events in the Sentinel trial, which was assessing the drugs in combination.

Most Dublin-based analysts remain optimistic that Tysabri will return to the market, but the great uncertainty remains when - and under what restrictions.

"The company is saying it could come back in the third quarter. I think the earliest you can see it is 2006," said Ian Hunter, analyst at Goodbody Stockbrokers.

David Marshall, analyst at NCB Stockbrokers, said that the product still has potential as a monotherapy for third-line treatment or for MS patients with advanced disease.

"You can still argue there's a reasonable market. It's certainly a niche," he said.

Hunter said that the product could still have potential in Crohn's disease, adding that "the main drug in Crohn's is Remicade, which has a very poor safety record."

While Biogen Idec has lost its main growth engine, it retains an MS franchise via Avonex, which has not been much affected by the recent events. For Elan, though, Tysabri had represented a ticket back to profitability. Its withdrawal from the market has eliminated the company's only near-term significant source of cashflow, which would have enabled it to meet debt obligations comfortably.

"Near term, at least, they have the cash to buy themselves the time to work out what they're going to do," Marshall said. Elan reported more than $1.5 billion in cash on Dec. 31, more than enough to meet debt obligations of $1.1 billion in 2008, as $460 million of the latter total is convertible to equity. But it has another about $1.2 billion worth of debt maturing in 2011.

"If it's a very injured product, or if it's not a product at all, they will certainly have to look at other asset disposals," said Jack Gorman, of Davy Stockbrokers.

The most obvious beneficiary from the incident has been Geneva-based Serono SA, which has the MS treatment Rebif (interferon beta-1a). That had been expected to lose market share to Tysabri, but in a research note published by Canaccord Capital's London office, analysts Mike Booth and Karl Keegan stated that that threat had been overstated in any case and had been, "temporarily at least," removed.