Wyeth (WYE): Speculative play on Alzheimer's

Wyeth (WYE): Speculative play on Alzheimer's
Posted Apr 23rd 2008 12:36PM by Steven Halpern

Regarding his latest new buy recommendation -- Wyeth (NYSEL WYE) -- biotech expert Michael Shulman states, "OK, I know what you're thinking. Wyeth?! It's a lousy big pharma with a stock price that's down 12% in the past 10 years."

Nevertheless, in his ChangeWave Biotech Investor he explains, "I like Wyeth for two very good reasons: It's a great play for the current market, and it's a good speculative play on disease breakthroughs."

"Believe it or not, WYE is a cash-rich big pharma selling below its potential breakup value and it has a very good Alzheimer's disease treatment in its pipeline. The Alzheimer's treatment is the primary reason for this recommendation.

"I've written extensively about Alzheimer's and I've kept an eye on this particular Wyeth drug and the potential it has for success.

"The Wyeth drug in question is a genetically engineered antibody called bapineuzumab. It's the second formulation of a 'vaccine' that showed dramatic improvements in cognition and reduction in brain plaques (as determined by autopsy) in its original formula.


"Unfortunately the first formulation also generated encephalitis (brain swelling) in a meaningful number of patients and the trial was suspended.

"The second-generation product is a passive, versus active, vaccine. It doesn't trigger the aggressive immune response from the body that was the cause, Wyeth believes, of the encephalitis.

"The early Phase II results haven't been published, but they must have been great because the company is already going ahead with a very expensive Phase III trial with 4,100 patients.

"Meanwhile, Wyeth has major marketplace winners such as Enbrel, a $5-billion drug for arthritis and psoriasis, and anti-depressant Effexor with $4 billion in sales. The company also has $3 billion in sales of consumer products such as Advil and Preparation H.

"The company has $22 billion in sales; $3.40-$3.60 in profits per share, giving it a P/E of 3; a 2.5% dividend; more cash than debt; and 72% gross profit margins. It is everything you would expect a big pharma outfit to be -- but up to one-third of revenues now come from biotech products such as Enbrel.

"Make no mistake, however. As far as I'm concerned this investment recommendation is about one drug: bapineuzumab. At this point I believe the possibilities for bapineuzumab (let alone the rest of the pipeline) are not really factored into the stock price.

"If bapineuzumab fails in trial, the stock will take a modest hit -- maybe a few of points -- and if WYE posts strong results in June it will start a stock run that could push it back to the mid-$60s. Anyway we look at it that's a very good risk/reward ratio for a recession-proof, cash-rich company."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

Irish newspaper talks about Elan & Wyeth drug

Alzheimer's prediction helps Elan jump 6pc
By Ailish O'Hora
Tuesday April 08 2008
http://www.independent.ie/business/irish/alzheimers-prediction-helps-elan-jump-6pc-1341260.html


Shares in Elan finished yesterday up over 6pc at €14.72 on the back of estimates that an Alzheimer's treatment co-developed by the Irish drugmaker and international giant Wyeth could notch up sales of over $13bn and surpass Pfizer's cholesterol treatment Lipitor to become the biggest drug of all-time.

According to a report in the influential Wall Street publication Barron's, healthcare investor Larry Feinberg, whose flagship healthcare hedge fund Oracle Investment Management has averaged 21pc over the past 18 years, said that the effect on Wyeth's shares could be a 50pc increase over the next year.

In early 2002, Wyeth was forced to halt an Alzheimer's vaccine trial after 18 out of 300 patients developed encephalitis. But the report stated that the two companies are sponsoring research aimed at neutralising the adverse reaction.

Wyeth researchers believe that what caused the brain swelling was the use of an "active" inoculation that mobilises the body's immune system to produce antibodies. So in 2005, they began testing a "passive" vaccine that supplies antibodies directly to fight senile plaques in the brain -- a characteristic feature of Alzheimer's Disease.

The US Federal Drug Administration (FDA) fast-tracked the study after patients seemed to show signs of mental improvement from even moderate doses of the drug. Results of the Phase II trial on 240 patients are due in June and there is also an ongoing Phase III trial, involving 4,100 people and costing an estimated $300m -- although it will probably be years before the treatment is fully tested and reviewed by regulators. Other biotechnology companies are also testing Alzheimer's treatments.

Elan is probably more famous for its multiple sclerosis treatment Tysabri which is also used to treat Crohn's disease.

Shares in Elan tumbled back in February when it emerged that Tysabri could cause significant liver damage in patients.

At the time, the US regulator, the Food and Drug Administration (FDA) announced that Elan and its US partner Biogen Idec had written to doctors to warn them of the danger.

Tysabri was taken off the market in 2005 shortly after its initial launch after three cases of a potentially fatal brain infection known as progressive multifocal leukoencephalopathy emerged.

The drug returned to the market in 2006 with limits after the FDA decided MS patients were willing to accept the risks in light of possible benefits.

- Ailish O'Hora