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Elan Stung by Research Report

Piper says a survey of doctors finds that many expect Tysabri to return to the market with restrictions.
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Tysabri, the multiple sclerosis drug from

Biogen Idec

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, should return to the market but with strict limitations because of safety concerns, according to a survey of doctors conducted by investment research firm Piper Jaffray.

The survey revealed that while 92% of doctors believe the drug could be a valuable therapy to patients, only 59% think it should return to the market. A Food and Drug Administration advisory committee is scheduled to meet for two days next week to decide whether the drug can again go on sale.

Piper Jaffray analyst Deborah A. Knobelman expects the FDA to either allow the drug to return or to say Tysabri is approvable pending the results of safety analyses that are expected this fall. The survey involved 140 neurologists, 27% of whom have prescribed Tysabri.

At most, doctors expect to use the drug in 10% of MS patients, Piper Jaffray said.

Tysabri was withdrawn early last year after being linked to a brain disease called progressive multifocal leukoencephalopathy. The disease, which can be fatal, is more common in patients with an impaired immune system than in the general population. Drugs used for treating diseases like MS and rheumatoid arthritis tend to suppress the reactions of an overworked immune system. Three PML cases were found among patients who had taken Tysabri.

The Piper Jaffray survey found that 57% of the doctors believe Tysabri's effectiveness is worth the risk of PML only with patients who haven't responded to other MS drugs. Only 6% of physicians would use Tysabri as a first-line therapy on newly diagnosed patients, according to the firm's research report.

To draw a comparison, Knobelman noted that the


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drug Lotrenox was pulled from the market after reports of five deaths related to its use but was again cleared under limited circumstances without Glaxo having to submit additional data.

The analyst kept her market-perform rating on Elan, but lowered her price target on the stock to $14 from $15. Her research note says that on the basis of the results of the survey, the value of Tysabri to Elan is $9 a share "and has been more than accounted for in the current stock price."

Meanwhile, conspiracy theories were flooding the Elan message boards -- making it not unlike the boards of many other public companies. Earlier in the day, for instance, a spirited debate was taking place as to whether the Piper Jaffray research note even existed.

Lately, shares of Elan were sliding $1.66, or 11.9%, to $12.29. Biogen Idec's shares were dropping $3.07, or 6.1%, to $47.03.