Elan tumbles as drug trial news disappoints

Shares in troubled pharmaceuticals company Elan lost a third of their value at one stage yesterday after the company revealed that critical trials on a treatment for Crohn's Disease had failed to meet their targets.

By close of business, the stock had fallen 30.8 per cent to $4.47 in heavy New York trade. It closed down 25 per cent in Dublin earlier.

Elan said the trials of Antegren as a treatment for the chronic gastrointestinal condition, which it is conducting in association with US biotech giant Biogen, failed to show a statistically significant difference between those being treated with the experimental drug and those receiving a placebo after 10 weeks.

The results stunned markets which had been expecting good news on the trials. Coming shortly after the company was forced to seek a delay in filing its accounts for last year in a row with the Securities and Exchange Commission over its treatment of certain off balance-sheet vehicles, analysts said the news would only increase the nervousness of investors.

NCB analyst Mr David Marshall said: "Credibility and sentiment are much weaker than it was even two months ago." Goodbody's Mr Ian Hunter said it would put back Elan's Antegren programme by at least a year. "This is particularly disappointing as the market thought it would be a positive announcement," he said.

However, the consensus view was that while the latest setback would make holders of Elan debt more wary, it would not have an impact on the company's restructuring in the short term.

The trial results mean there is little chance of Elan and Biogen making a filing to the US Food and Drug Administration (FDA) to license Antegren for use on Crohn's patients this year.

The companies said their next step would be to talk to the FDA and see if further trials would be demanded. Mr Jack Howarth, Elan's head of investor relations, told a conference call any such trials could involve delay and expenditure. Last night a company spokeswoman said: "It would not be appropriate to speculate about the impact of this announcement for the company because the next step is to talk to the FDA."

The full trials data are expected to be published at the annual convention of the American College of Gastroenterology, which meets in October.

Addressing a conference call, Elan's head of R&D, Dr Lars Ekman, said that, despite the larger-than-expected response from the placebo group at 10 weeks, there was a notable difference in response between the groups after 12 weeks. He said the companies had been "unfortunate" at the critical 10-week point. But he also said there had been no serious side effects noted during the trials.

The firms stressed the results did not affect ongoing trials for Antegren as a treatment for multiple sclerosis (MS). Trial results are not due until the last quarter of 2004, but analysts said Antegren could be licensed by the FDA to treat MS before Crohn's.