Elan Corporation (NYSE:ELN - News) recently announced that it has entered into a manufacturing agreement with Lonza Group AG (Other OTC:LZAGY.PK - News). As per the agreement, Lonza will supply the active pharmaceutical ingredient (AMEX:API - News) of ELND005 (scyllo-inositol).
In December 2010, Elan had modified its agreement with Transition Therapeutics Inc. (NasdaqGM:TTHI - News) following Transition Therapeutics’ decision to exercise its opt-out right under the original agreement. According to the modified agreement, not only has Transition Therapeutics returned the 30% stake in ELND005 to Elan, it will also no longer fund the development of ELND005. Elan paid Transition Therapeutics $9 million in January 2011 and is obligated to pay an additional $11 million upon the initiation of the next ELND005 study. However, Elan will no longer pay the stipulated $25 million as a milestone payment on the commencement of the phase III study for ELND005.
ELND005 is a small molecule beta amyloid anti-aggregation agent. In August 2010, Elan and Transition Therapeutics had reported data on ELND005 from a phase II study for Alzheimer’s disease. While the study failed to achieve statistical significance for its co-primary endpoints, the companies said that the safety and tolerability data were encouraging. Elan will continue to pursue the development of the candidate for Alzheimer’s.
Meanwhile, the company plans to evaluate ELND005 for other indications such as bipolar disorder for which a proof of concept, phase II study will be conducted. The agreement with Lonza will help Elan ensure high quality supply of ELND005.
We currently have a Neutral recommendation on Elan. The stock carries a Zacks #4 Rank (Sell rating) in the short run. The company is highly dependent on Tysabri for revenue generation. In this scenario, we note that an increase in the number of progressive multifocal leukoencephalopathy (NYSE:PML - News) cases associated with the use of Tysabri could lead to a slowdown in the sales of the drug going forward.
More From Zacks.com