A third patient contracted PML taking Tysabri

Shares in Irish drug maker Elan Corp. PLC and Biogen Idec Inc. of the U.S. tumbled Thursday after the companies confirmed that a third patient taking their suspended drug Tysabri had contracted a rare neurological disease.

Analysts said the latest suspected link between Tysabri and a usually fatal disease called progressive multifocal leukoencephalopathy, or PML, deeply dented hopes that the drug would return to sale this year.

Elan Chief Executive Kelly Martin was counting on Tysabri, which won U.S. approval for treating multiple sclerosis in November, to help return the Dublin-based company to a profit in 2006. Martin, 46, a former Merrill Lynch & Co. banker, was hired in 2003 to turn the company around and has sold about $2 billion in assets to pay down debt.

The two companies said the Crohn’s patient died in December 2003 after taking eight doses of Tysabri over an 18-month period. They said the cause of death was originally misdiagnosed.

Analysts said that until now, those optimistic about Tysabri’s medium-term prospects had been gambling that the PML risk would be restricted to MS sufferers who took Tysabri in conjunction with Avonex, a well-established MS drug produced by Biogen Idec.

That was the situation in the first two confirmed cases. But the latest case uncovered involved a Crohn’s patient who was not taking Avonex alongside Tysabri.

Shares of Elan Corp. sank as much as 58 percent.
Shares of partner Biogen Idec Inc. fell as much as 9.9 percent.

“This greatly reduces the likelihood of the drug coming to the market,” said Ian Hunter, an analyst at Goodbody Stockbrokers in Dublin. “And given the U.S. regulators’ stance on drug safety, it also implies a longer timeline to potential re-emergence onto the market.”

“If it’s to come to the market, we now believe it will be with restrictive labeling, reducing the drug to a second line treatment at most,” he said.

Hunter expects Elan to focus on its existing businesses. He said that by 2008, Elan may have an Alzheimer’s candidate drug close to market, he added. Elan is currently developing four Alzheimer’s treatments, one of which is in Phase I clinical trial.

At most, Tysabri might be allowed on the market “in a salvage role for those for whom nothing else works and their disease is progressing,'’ he said. “The fact that the case was in monotherapy is really bad, it’s almost like a death blow.'’

Elan shares fell 3 euros, or 55 percent, to 2.50 euros at 2:26 p.m. in Dublin after trading as low as 2.30 euros.

Elan shares have lost more than 85 percent of their value since the companies withdrew Tysabri on Feb. 28, cutting the Irish drugmaker’s market value to 968 Million euros ($1.25 billion) from about 7.9 billion euros. Biogen Idec has lost about half its market value during the same period and now is worth about $11.5 billion. Biogen Idec shares fell $3.80 to $34.55 as of 9:43 a.m. in New York.