Feuerstein's Biotech-Stock Mailbag: Elan
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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV