Add in Tysabri uncertainty. Re-occurrence of the serious brain infection known as progressive multifocal leukoencephalopathy (PML) was expected -- warnings are in the Tysabri label -- and the two patients diagnosed with PML are alive. That's where the good news ends because it seems likely that doctors will be much more cautious about prescribing Tysabri to their multiple sclerosis patients going forward.
Sure, the diehard Elan bulls may hang on somewhat, but many of them were selling Wednesday when the bapineuzumab data came up lame. The hit from Tysabri, just a day later, is like the Wall Street version of a waterboarding. Even the very strongest hands are likely to succumb.
Consider this: The value of Fidelity Investment's massive 15% stake in Elan fell more than $900 million after the bapineuzumab data were presented. Based on Elan's after-hours swoon Thursday, the value of Fidelity's Elan investment fell $1.5 billion.
Even for Fidelity, that's a lot of money. If the mutual fund giant starts selling Elan, if it hasn't already, the stock is not going to recover anytime soon.
Let's talk valuation. Natixis Bleichroeder analyst Corey Davis, a table-pounding Elan bull, pegged Tysabri's value at $13 a share. That was before the new cases of PML popped up. He gave Elan another $3 a share in value for the base business, which includes drug delivery, and $24 a share for bapineuzumab.
Davis is not giving up on bapineuzumab, in fact, he appears to be doubling down, but just about everyone else is. So, scratch the $24 a share from his model and you're left with Elan trading at $16 a share, before this latest Tysabri scare.
The European pharma analyst at UBS puts Elan's fair value, ex-bapineuzumab, at $18 a share. That's the same guess at valuation offered to me by several Elan short-sellers Wednesday at the ICAD conference, by the way. Again, this is all before Thursday night's Tysabri shocker.