Shares of Irish drugmaker Elan ( ELN) took a hit Friday along with hopes for a new Alzheimer's treatment, as four patients in a French study came down with potentially serious symptoms. "While the vaccine represents a potential breakthrough treatment approach if successful, last night's disclosure raises legitimate concerns about the viability of the program, which is very important to the long-term outlook of Elan," said David Steinberg, an analyst at Deutsche Banc Alex. Brown, in a research note. He lowered his recommendation on Elan to market perform from buy, cutting his price target to $42. Elan said it would temporarily halt patient dosing in a Phase 2A study of its Alzheimer's vaccine candidate after four of 97 patients in France were reported to have clinical signs consistent with inflammation in the central nervous system. The cause of the symptoms remains unknown. Elan ended down $6.15, or 13.7%, to $38.65; it was the fifth most active stock on the New York Stock Exchange. Other firms to downgrade Elan included SG Cowen and RBC Capital Markets.
"It's important to say the study is ongoing, and the dosing schedule should allow enough time to conduct the investigation without imperiling the study," said Max Gershenoff, a spokesman at Elan. price-to-earnings ratio of 20, using forecasts for earnings of $2.27 in 2002. Nevertheless, he said, the quality of the company's earnings remains a lingering question: "Net income has largely grown through a combination of purchase acquisitions, numerous circular joint ventures and other sources of lower quality revenue," Steinberg said in his note. Elan declined to comment on the Deutsche Banc Alex. Brown note. Several analysts defended Elan. Freidman Billings Ramsey, Gruntal, Banc of America Securities and A.G. Edwards all reiterated their recommendations of the stock.