US regulators have stepped up their inquiry into share transactions just ahead of the voluntary suspension of a multiple sclerosis (MS) drug from the market at the end of February.
The Securities and Exchange Commission (SEC) commenced an informal examination of trading in Elan and Biogen stock after the withdrawal of Tysabri from sale in the US and the suspension of clinical trials for multiple sclerosis, Crohn's disease and rheumatoid arthritis involving the drug.
The suspension was sparked by the diagnosis of a rare and generally fatal neurological disease in two trial patients.
However, the SEC has now formalised its inquiry in relation to Biogen. In a filing to the SEC yesterday, the company acknowledged that it had received the formal order of investigation on April 21st.
A spokeswoman for Elan said there had been no change in the informal status of the inquiry into transactions of its stock and none was expected.
Biogen, in its annual report, had said that the informal inquiry was probing its involvement in the Tysabri suspension and the trading of its shares by its directors, officers and employees.
The filing with the SEC yesterday also noted that the company now faces five separate shareholder lawsuits, alleging company insiders profited in share dealings before Biogen revealed safety concerns about the drug and withdrew it.
Biogen's chief counsel, Thomas Bucknum, resigned in March after a regulatory filing revealed that he had reaped a windfall profit from selling Biogen shares just before the company announced it was suspending sales of Tysabri.
The company said in the filing that it could not predict the outcome of the SEC investigation or the time it might take to complete. It also noted that costs, partly related to the investigation, would affect its results for the full year.
The news wiped out early gains in the company's stock following results on Thursday.
Davy analyst Jack Gorman noted that both Biogen and Elan sounded confident in first-quarter results that "a pathway to market could be established for Tysabri, once the risk/benefit profile is defined".
The upbeat mood from company management saw Elan investors push the stock ahead almost almost 18 per cent in Dublin trade yesterday to close at €4.20. In the US last night, the shares were trading at $5.36, up 14 per cent on the session.
Broker NCB said Tysabri could still be a significant performer for Elan if it wins approval from the US Food and Drug Administration to return to market, with up to 180,000 MS patients currently having "no effective treatment over the near to mid-term".
