SEC Eyeballs Elan

So now...It is reported that, on September 24, the US Securities and Exchange Commission subpoenaed the Dublin-based Elan for information regarding 2 announcements from 2008. The SEC subpoena was revealed in Elan's most recent filing with the Commission.

According to the filing, the SEC is investigating Elan's July 29, 2008, announcement of phase 2 data for bapineuzumab and the company's July 31, 2008, announcement of 2 Tysabri-related cases of progressive multifocal encephalopathy (PML). Elan currently comarkets the monoclonal antibody Tysabri (natalizumab) with Biogen Idec for the treatment of multiple sclerosis and is codeveloping the anti-amyloid monoclonal antibody bapineuzumab with Wyeth for the treatment of Alzheimer disease (AD).

The July 29 filing ("Elan and Wyeth Present Encouraging Results from Phase 2 Clinical Trial of Bapineuzumab at International Conference on Alzheimer's Disease"), which parrots an Elan press release of the same date, optimistically described the phase 2 results of bapineuzumab in patients with mild-moderate AD. The study results were used to promote the drug's ongoing clinical development, despite the fact that a statistically significant difference between the mAb and placebo for the primary endpoint was not observed. Dose-dependent vasogenic brain edema was also reported with bapineuzumab, especially in patients with the ApoE4 allele.

The phase 2 bapineuzumab data were first publicized by Elan in a July 17, 2008, press release (discussed here)—in which the missed primary endpoint was buried in the second paragraph and favorable post-hoc results were highlighted. Initial news of the study results was associated with substantial increases in Elan's and Wyeth's share prices (10.6% and 4.8% bumps, respectively) and generally favorable Wall Street buzz. However, after the same data were presented in the sober context of the International Conference, the companies' respective share prices dropped 19.6% and 11.2% (see "Bapineuzumab and Share Prices of Elan/Wyeth: What a Difference Some Undefined Thing Makes").

It seems reasonable to speculate that the SEC is investigating Elan's presentation of the bapineuzumab data in conjunction with a pump-and-dump-like scheme.

Reasons for the SEC's investigation of Elan's report of the PML cases are less obvious. The filing of July 31, 2008, described 2 European patients with multiple sclerosis who developed the potentially fatal, opportunistic infection after prolonged Tysabri monotherapy (14 and 17 months). To date, 11 cases of Tysabri-related PML have been reported since the drug's reintroduction into the marketplace in 2006. The risk of PML with the drug increases substantially with prolonged therapy (>12 months).

Two short weeks ago, JNJ closed its highly publicized buyout deal with Elan, in which JNJ acquires the rights to Elan's AD immunotherapy program. The program includes the development of bapineuzumab. The major sticking point of negotiations between the 2 companies became JNJ's potential access to Tysabri. Tysabri comarketer Biogen cried breach of contract with Elan over the initially proposed buyout, and a federal judge agreed. The newly cemented JNJ-Elan deal (for $100 million less than the original offer of $1.5 billion) omits the mAb.