Elan-Wyeth Alzheimer's Data Spook Bulls

(Editor's note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

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Updated from 8:35 a.m. EDT

CHICAGO -- The coronation of bapineuzumab as the future king of all Alzheimer's drugs has been put on hold.

Elan (ELN Quote) and Wyeth (WYE Quote), co-developers of bapineuzumab, entered Tuesday's presentation of phase II data at the International Conference on Alzheimer's Disease brimming with confidence.

After more than a month of speculation, researchers, the public and Wall Street were finally going to see the clinical data that would clearly establish bapineuzumab as the game-changing treatment for Alzheimer's disease. Skeptics, including short-sellers of Elan shares, were going to be vanquished once and for all.

By Tuesday night, however, the script had been rewritten. The presentation of the bapineuzumab data was weak, the results were underwhelming and inconclusive. Far more questions about the future of the drug were raised than were answered.

Investors reacted accordingly, selling Elan and Wyeth shares sharply in after-hours trading. In recent trading Wednesday, Elan was sinking $12.21, or 36.2%, to $21.54, and Wyeth was losing $5.05, or 11.2%, to $40.06.

As I did back in June when Elan and Wyeth first announced top-line results from the phase II bapineuzumab study, let's dissect the big issues affecting the drug Tuesday with a hypothetical Q&A.

Those are some strong words you use above to describe the bapineuzumab data presentation. Aren't you being a bit harsh?

Not really. Let's get real here. This phase II study failed its primary endpoint rather convincingly. Patients treated with bapineuzumab showed no improvement in either cognition or function compared to placebo.

So, what did Elan and Wyeth do with these negative results? They essentially threw them out and rewrote the rules of the study in order to find groups of patients who responded. First, the two companies changed the statistical analysis plan. Second, they broke down and analyzed the data for efficacy based on a post-hoc subgroup comparing patients who are carriers and non-carriers of the ApoE4 gene, a genetic variant that increases a person's risk for developing Alzheimer's.