Biotech Mailbag Bonus: Elan Story Causes Stir

Response -- both supportive and critical -- has poured in over my story Wednesday on the Alzheimer's drug bapineuzumab that is being developed by Elan(ELN - Cramer's Take - Stockpickr) and Wyeth(WYE - Cramer's Take - Stockpickr).

To summarize, the story detailed how the two drugmakers are using their own newly created endpoint in a phase III trial for bapineuzumab, rather than the industry standard that has been the basis for all Alzheimer drug approvals to date.

The story is important enough (in my humble opinion) and the feedback strong enough to justify a special Friday edition of the Biotech Mailbag. I'll devote this space entirely to the Elan-Wyeth story so that I can leave room for lots of other good stuff in my regular Saturday Mailbag.

---

I'll start with a research note issued by Corey Davis, the specialty pharmaceuticals analyst at Natixis Bleichroeder. He has a buy rating on Elan and a $31 price target, so naturally, he took issue with my cautious, if not bearish, thesis. (Natixis has no banking relationship with either Elan or Wyeth.)

Davis says my story wasn't new news because "Elan has been very public for years that both the NTB [Neuropsychological test battery] and the more traditional ADAS-Cog will be examined as a measure of cognition in their Alzheimer's studies."

He goes on to write that the Food and Drug Administration has vetted Elan's approach to the phase III trials, including approving the company's NTB endpoint. He also wrote that the company has an agreement from the FDA that it can adjust the endpoints of the phase III studies depending on how the phase II bapineuzumab study turns out. [We get to see those data mid year.]

"Officially in the Investigator's brochure, NTB is listed as the primary endpoint [of the phase III trials], but again, they can change this at some point well before the data are unblinded," Davis wrote. "There can always be improvements in scales used for clinical trials -- especially ones that are as subjective as Alzheimer's. Elan is not trying to pull a bait and switch but simply trying to advance the science and pioneer improvements."

Davis fairly encapsulates much of the criticism of my story, which boils down to a belief that Elan and Wyeth wouldn't invest tens, or even hundreds, of millions of dollars in an Alzheimer's drug program without making sure that everything they're doing is by the book and green-lighted by the FDA.

I do appreciate Davis' further confirmation of a central point in my story -- that the NTB is listed as the primary endpoint of the phase III studies. I find that interesting for a simple reason: If bapineuzumab is truly the effective drug against Alzheimer's that Elan bulls believe it to be, then why the need for a new and unproven cognitive endpoint to prove it?

Let me put that another way: Given that Elan took a look at interim data from the bapineuzumab phase II study before signing off on a decision to move to phase III, why not just use ADAS-cog -- the gold standard test for cognition -- as the primary endpoint of the phase III studies if the drug was, indeed, demonstrating a great improvement on that scale in the phase II study?

I don't know what the phase II data on bapineuzumab are going to look like. I readily concede that. But it doesn't make sense to me for Elan to be fiddling with a new endpoint if the old and well understood endpoint is working just fine.

We will know for sure when the phase II data are released by Elan in a few months. If bapineuzumab causes a dramatically positive improvement on ADAS-cog, then I'll gladly acknowledge the error in my thesis.