Alzheimer's Club

"Elan director and world renowned authority on Alzheimer's disease, Dennis Selkoe MD, sold 2,800 Elan shares for $120,000 indicating a price of $43.65 in "early December 2001" the company has stated to The Sunday Business Post.

This was shortly before the pharmaceutical company announced poor results from its major Alzheimer's tests on January 18, 2002. The share price subsequently collapsed to a recent price of around $2.

Selkoe also sold 20,000 shares for just over $1 million on February 6, 2001. Elan directors' sales, in all, came to over $43.5 million in February 2001. Selkoe had indicated that he would sell 8,303 Elan shares, worth $364,623 on December 10, 2001 but the company only has records of the smaller sale. Selkoe appears to have been the only director to sell shares last December. He also gave 232 shares to charity in December and January.

The company also said that Selkoe continues to own 163,000 shares. "We have a detailed securities trading policy which requires directors and other senior management to pre-clear sales with the chairman and our legal advisors," according to company secretary, Liam Daniels. Under this system, Selkoe "did receive approval to sell in February 2001 and again last December," he added.

Selkoe joined the board of Elan in 1996 following Elan's acquisition of Athena, where he had been a director and co-founder. He is a professor of neurology and neuroscience at Harvard Medical School and is also a co-director of the Centre for Neurologic Disease at the Brigham and Women's Hospital.

Daniels, said the first indication of adverse events with the Alzheimer's drug tests "were in early January 2001. Obviously, we did detailed assessments because safety was a major concern. This concern arose during the tests," he said. Daniels describes Selkoe as the "scientific founder of Athena Neurosciences" but he was not involved in the day to day aspects of the tests. The tests were being done in various locations by Elan and its partner, Wyeth.

Elan's shares were in the mid-$40 range on January 18, when it publicly announced difficulties with its Alzheimer's drug. It was only after this event that the company's other weaknesses were given attention by the press. The shares had already dropped to about $15 in early February as a result of test problems, when the Wall Street Journal's hammering of its accounting policies and the subsequent investigation by the SEC sent the shares even lower. They slid to below $2 in recent months.

Selkoe and Athena figured in a WSJ article in 1998 which reported that one of Athena's tests for Alzheimer's had been declared superior to rivals' tests by an expert panel convened by the National Institute of Health. Sales of the test rose immediately by 28 per cent. "Some Alzheimer's researchers are crying foul. Five of the panel's eight members had financial or research ties to Athena, a San Francisco, California, unit of Ireland's Elan Corp plc. The panel's "consensus report," in the journal Neurobiology of Aging, doesn't disclose these relationships. Some medical ethicists consider this a glaring omission," the WSJ said.

Selkoe, one of the Elan-connected people on the panel, told the WSJ that in retrospect, his affiliation should have been declared in the report. He also said that during the workshop he informed panel chairman Dr John Growdon about those ties..."

Source: Des Crowley. Elan Alzheimer's expert in pre-slump share sale. (18 August 2002) [FullText]

"Elan directors and officers made sales worth $43.5 million, mostly in the period January to February 2001, when the shares were trading close to their all-time high. Now shares in the troubled pharmaceutical company are languishing at $2.

This follows a 95 per cent plunge from the all-time high due to a combination of factors including an investigation by the US Securities and Exchange Commission into the company's accounts and disappointing results for some of the pharmaceutical products on which investors had pinned their hopes.

Former chairman Donal Geaney, who resigned recently, sold 160,000 shares on February 28 2001 for $8.6 million, indicating a price of $53.75 -- close to the share's all-time high. Director John Groome sold $12.85 million worth on February 8. Brendan Boushel scooped up $8 million and Lisabeth Murphy, described as an officer, picked up $6.24 million for her shares.

A spokesman for the company, PJ Mara, said that, "it was then seen as just taking a bit of money off the table". Most of them still have most of their shares, while Mara still has some options, he added sadly.

Director share sales are closely monitored by investors, as they are often interpreted as a sign that the directors believe the shares have reached a peak, though the reality is that directors may sell for a variety of reasons, including meeting a personal financial need such as buying a house. And while hindsight may be 20/20 vision, a number of share sales by Irish directors seem to have been well timed, as the bull market of the 1990s turned to a bear market in 2000.

Several Sherry FitzGerald directors made modest purchases in the estate agency in April, at around 95c. This was after major share sales a year earlier at a much higher price. Then, Sherry director James Meagher sold 100,000 shares to realise €170,000, while Gerry Murphy sold 59,895 shares for €101,821. They, plus unnamed members of the management, placed a total of 941,203 shares at €1.70. Sherry FitzGerald said that it was to satisfy demand from an institutional investor and to improve liquidity. Soon afterwards Sherry was hit by the property slowdown.

Sherry's shares are now at €1, having been as high as €2.40 at one time. Cavan construction materials group Kingspan is another company that has hit choppy water. Director Dermot Mulvihill sold 100,000 shares at €4.24 on July 3 2001. The shares were at €1.95 at the time of writing. James Paul sold 109,000 at an average of about €3.90 around the same time. Russell Shiels unloaded 100,000 at €4.30 in the same period. But the directors have also bought recently. Eoin McCarthy acquired 958,335 shares at €1.14 on June 14. Russell Shiels has also made a small purchase recently.

Mulvihill says that he sold the shares to pay for a house he was building. He understands that Shiels was also buying a house in the United States. And Paul's sale was simply portfolio diversification. In April 2001 IAWS finance director David Martin raised €570,000 after exercising options over shares in the agribusiness company. Around the same time, chief executive Philip Lynch made a profit of €1.7 million on 300,000 options. He got the shares for €2.90 each and immediately sold them into the market at €7.40 each. His latest sale was last March 25 at €9.175 -- he exercised options and sold at a profit of €707,500. The shares have since fallen to €8.20. Last October Lynch made of a profit of €1.63 million in a similar transaction.

Around March, Martin sold at a price of €9.30, the year's high. His profit was €457,500. An IAWS source considers that Lynch and Martin have to face the institutions regularly and would not be selling on the belief that the shares would go down. "They no doubt expected them to go up," he said.

The Kerry Group's all-time high was €15.81. Former chief executive Denis Brosnan sold almost half of his holding in the agribusiness company on March 12 this year at €15.42. The shares now stand at €13.55. After the sale of the 308,000 shares Brosnan still held 360,000. Kerry says that Brosnan, as a result of assuming the role of chairman, exercised options last year using borrowings and held the shares until a `dealing window' allowed him to sell.

"It has all to do with his becoming chairman," a spokesperson said.

Michael O'Leary of Ryanair is still selling. On June 13 he and the Ryan family unloaded €47 million worth of shares. This represented 14 million shares at a price of €6.70 per share. The shares are now at €6.05, but have been lower since the sale. The Ryans would not comment, but the O'Leary attitude is generally that he is simply taking some money off the table.

It is estimated that the founding Ryan family, including Tony Ryan, has unloaded shares worth more than €340 million since the company floated in 1997. Until now the shares have generally been unaffected by these sales, and have moved inexorably up.

Michael O'Leary has also been a regular seller, chalking up €175 million in total. June was the fourth time he sold. In the case of radiator to plastics group Barlo, Aidan Barlow lightened his holding from 5.86 million shares to 5.16 million in the year to end March 31 2001 at a price in excess of 80c.

The company says that this was understood to be for family reasons. The company has had a hard time in the last few years, and on July 2 Aidan Barlow picked up 344,000 shares at 23c. Another director, Brian Beausang, has also been buying shares. Barlo's shares are now 27c compared with a 12-month high of 79c.

Bookmakers Paddy Power plc, formerly Power Leisure, is a relative newcomer to the market and agreements locking in 27 per cent of the shares came to an end on July 24. This saw Peter O'Grady-Walshe selling 130,000 shares and Edward McDaid unloading 20,000.

This was not quite a flood of selling, but the sale of 420,000 from a charitable trust set up by chairman Stewart Kenny will emphasise to other shareholders that setting up such trusts allow share sales that would otherwise have been prevented by a lock-in.

All the above transactions were at €5 a share and the shares are now €5.10.

Company secretary Charlie Kelly says that, while there might be personal reasons for selling in each case, Paddy Power has been under pressure to increase liquidity in the stock. "It was lack of liquidity that drove it to €6 earlier this year, and the sales help this situation," he said. "Our stockbrokers would like more liquidity in the stock so that the price does not gyrate too much when institutions buy." Chief executive Stewart Kenny, sold one million shares in March at 455c, but he agreed to a new lock-in, to March 20 2003, for the remainder of his shares. This did not bind the trust, which received shares from him, Kelly said. O'Grady-Walshe and McDaid sold 50,000 and 20,000 respectively on March 21 at 455c..."

Source: Des Crowley. Directors who sold before the downturn. (11 August 2002) [FullText]

Also see the article on shares sale by Dennis Selkoe, science leader of Alzheimer's Vaccine Program by Elan: Des Crowley. Elan Alzheimer's expert in pre-slump share sale. (18 August 2002) [FullText]

"Athena Neurosciences Inc. scored a coup last April, when an expert panel convened by the National Institutes of Health suggested that one of its tests for Alzheimer's disease was superior to rivals' tests in diagnosing the dementing illness. Athena wasted no time trumpeting the results to thousands of physicians. The report "has been very, very good for us," says David Hanak, a product manager at Athena, noting that sales of the genetic test are up 28% this year.
But in a flap that underscores the often-close ties between the pharmaceutical industry, government and academia, some Alzheimer's researchers are crying foul. Five of the panel's eight members had financial or research ties to Athena, a South San Francisco, Calif., unit of Ireland's Elan Corp. PLC. The panel's "consensus report," published in the journal Neurobiology of Aging, doesn't disclose these relationships. Some medical ethicists consider this a glaring omission.

In addition, Athena provided a $100,000 grant to fund the study and played a behind-the-scenes role in launching it. The company's unrestricted grant was disclosed in the report. But the nonprofit Alzheimer's Association, which used the funds to organize the panel on behalf of the NIH, now says it regrets accepting Athena's financial support. "It interferes with the perception of the credibility of the statement," concedes William Thies, vice president for medical and scientific affairs at the Alzheimer's Association.

While agreeing that Athena's ties to the panel should have been disclosed, Dr. Thies, NIH officials, the editor of Neurobiology of Aging and several panel members all insist that each panel member was aware of the others' ties. They also stress that the views expressed in the report are scientifically solid and not biased in favor of Athena. The NIH, while noting that its policies forbid product endorsements, says it has no jurisdiction over how Athena uses the report in its marketing.

The report wasn't an unqualified recommendation of Athena's test. It emphasized that there still is no way - short of an autopsy - to definitively diagnose Alzheimer's, which afflicts an estimated four million Americans. Still, the report did single out Athena's test as one that "can add confidence" to diagnosis in symptomatic, late-onset patients. For families desperate for answers - even imperfect ones - that distinction can be a strong selling point.

Doctors don't routinely use diagnostic Alzheimer's tests made by Athena or any other company, even though they have been available for years. Experienced neurologists can correctly diagnose the disease at least 70% of the time - mainly by ruling out other conditions. Tests specific to Alzheimer's seek to increase that degree of certainty, and at an earlier stage. Of the roughly 250,000 Alzheimer's diagnoses made annually by one estimate, fewer than 10% involve the $225 Athena test. [25,000 x $225 = $5.6 million]

None of the handful of Alzheimer's tests on the market is especially reliable. Athena's genetic test produces false or inconclusive readings about one-third of the time, a recent study showed. Even more importantly, there still is no cure or even effective treatment for the disease - though several drugs on the market can temporarily improve memory in a fraction of patients. Thus, many doctors feel that achieving 100% certainty in diagnosis is inconsequential.

"At the end of the day, unless you can tie this sort of diagnostic to a therapeutic, it's not clear where the value of testing is," says Walter Moos, chairman of MitoKor, a closely held San Diego company developing an Alzheimer's test, so far only for research purposes.

The Athena test spotlighted in the report is a blood test for a gene known as apolipoprotein E. The company says a faster, better diagnosis can improve physician care and potentially buy a patient time to prepare for the inevitable. But critics aren't persuaded. "I strongly disagree with Athena that it's an appropriate diagnostic test," says Hank Greely, a Stanford University law professor who co-wrote a recent study on the ethical implications of genetic testing for Alzheimer's. He believes any benefits are outweighed by the test's cost and its potential for unduly alarming genetically similar family members.

The field of Alzheimer's testing has been dogged by other controversies. In late 1996 another test maker, Nymox Pharmaceutical Corp., Montreal, ran mass-media advertisements stating that its test could definitively rule out the disease. The Alzheimer's Association retorted that the company didn't have published evidence to support its "highly objectionable" claims.

Today, a Nymox spokesman says: "The only people calling our ads controversial are our competitors or those people with commercial affiliations to our competitors." At around the time of the Nymox furor, while the Alzheimer's Association was pondering how to clear up public confusion over diagnostic testing, Athena came calling, recalls Zaven Khachaturian, an Alzheimer's research pioneer who directs the association's scientific programs as a paid consultant.

Athena suggested assembling a panel under the auspices of the association and the NIH. "They said they'd like to see a workshop done about the utility and scientific opportunity in diagnostic markers," Dr. Khachaturian says. "They gave an unrestricted gift of $100,000 with the understanding that they wouldn't control the meeting or have any say in who was invited or how it was conducted, and that's how the meeting was done."

Dr. Khachaturian, a member of the NIH panel, listed himself as an Athena consultant in an October 1997 article in the Journal of the American Medical Association. He did so, he says, because of indirect payments received by his firm for organizing the NIH Alzheimer's panel. But that affiliation wasn't listed in the panel's report, published six months later.

"There is an appearance of conflict," concedes Dr. Khachaturian. But the panel's purpose, he says, was to establish scientific criteria for evaluating Alzheimer's tests, not to promote a particular product. He adds: "I don't think in this case [disclosure] is relevant, but I could be mistaken." He stresses that he didn't contribute to the panel's written report.

Also on the panel was Teresa Radebaugh, Dr. Khachaturian's partner and, like him, an Alzheimer's Association consultant. Ms. Radebaugh says she acted merely as an administrator to the group and didn't contribute to its report.

Two other panel members had more direct financial stakes in Athena. Harvard researcher Dennis Selkoe is a board member and shareholder of Elan, Athena's parent. Allen Roses, a vice president at Glaxo Wellcome PLC and a professor at Duke University, was a consultant to Athena until mid-1997. He holds a patent on Athena's genetic test, and collects limited royalties.

A fifth panel member, John Trojanowski, had agreements with Athena in 1995 enabling him to receive proprietary research materials - including special strains of mice - from the company. Dr. Trojanowski says that because his Athena collaborations weren't financial, he sees no need to have disclosed them. In retrospect, Drs. Selkoe and Roses both now say that their affiliations should have been disclosed in the report. They both say that during the workshop they informed panel chairman John Growdon about those ties.

Dr. Growdon, a Harvard neurologist with no connection to Athena [AC: Who knows whether this is true?], calls the Athena ties of panel members "irrelevant." He adds, "Everyone had their academic hats on, not their company hats. The report is fair, honest, and not biased by any company affiliation."

Some medical ethicists disagree. "There is no doubt in my mind that you have to fully disclose what the ties are," says Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania, citing the increasingly pervasive connection between medical research and drug companies that stand to profit. "I don't believe the ties are necessarily distorting or necessarily bad, but people have a right to know what they are.""

Source: By Ralph T. King Jr. Did Ties To Alzheimer's Test Maker Sway NIH Report? The Wall Street Journal (30 November 1998) [FullText]