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The US Food and Drug Administration (FDA) recently granted fast track designation to Elan Corporation’s ELND005. ELND005 is being developed for the treatment of neuropsychiatric symptoms (NPS) in Alzheimer’s disease (AD).

We note that the FDA grants fast track designation to those candidates under development for the treatment of serious conditions, which have an unmet medical need. Elan is also developing ELND005 for the treatment of Down's syndrome.

We remind investors that last month, Elan’s shareholders rejected the proposed divestment of ELND005, along with a couple of other proposed strategic transactions. However, the shareholders approved the company’s proposed $200 million share repurchase program.

Following the rejection of its strategic transactions, Elan announced that it is gearing up for a formal sale process. However, the company is yet to provide any update regarding this. We expect investor focus to remain on this story.

Meanwhile, Elan currently receives royalty payments at 12% on worldwide net sales of the multiple sclerosis drug, Tysabri, after it sold the drug’s stake to Biogen Idec Inc. (BIIB - Analyst Report) in April this year. After the first year, Elan is expected to receive a royalty of 18% on up to $2 billion of global net sales of Tysabri and 25% thereafter on over $2 billion of global net sales of Tysabri.

Elan, a biotechnology company, presently carries a Zacks Rank #2 (Buy). However, other biotech companies like Spectrum Pharmaceuticals, Inc. (SPPI - Snapshot Report) and WuXi PharmaTech (Cayman) Inc. (WX - Snapshot Report) currently look better positioned with a Zacks Rank #1 (Strong Buy).

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