In a deal warmly welcomed by analysts, Ireland’s Elan Corp has a sold a major stake in the firm and the rights to its portfolio of Alzheimer’s disease investigational drugs to Johnson & Johnson in return for $1 billion.
Under the terms of the deal, J&J is getting an 18.4% stake in Elan and will acquire “substantially all of the assets and rights” of the Dublin-headquartered company related to its Alzheimer’s Immunotherapy Programme that is partnered with Wyeth. J&J is setting up a new affiliate to deal specifically with the latter programme and Elan will receive a 49.9% stake in the new venture.
That also means that Elan will still be entitled to a 49.9% share of the profits and certain royalty payments upon the commercialisation of products under the collaboration with Wyeth. The lead candidate in the programme is the much-touted bapineuzumab, which is in Phase III trials.
The deal represents the end to a process begun in January when Elan hired Citigroup to perform a strategic review of options for the firm. Management said that it preferred to see a third party to take a minority stake in the company and the likes of Pfizer, Roche, Lundbeck, Bristol-Myers Squibb and,most recently, Novartis, were linked with Elan.
J&J has won the day, however, and Husseini Manji, head of neuroscience, said that “we expect to focus our resources on bringing the AIP to fruition as quickly as possible because of its potential to slow the progression of Alzheimer’s disease”. J&J added that it will initially commit up to $500 million to continue the development and launch activities of bapineuzumab.
Analyst Ian Hunter at Irish broker Goodbody lauded the deal, saying that Elan has “at one stroke removed the debt overhang on the company, reduced its risk exposure to bapineuzumab and reduced its forecast R&D expenditure over the next three years by $500 million”. He noted that one downside to the deal has to be the loss of control over the development of bapineuzumab, “a drug Elan has brought from the lab to Phase III, only to cede 50% of potential future profit to maintain current liquidity”.
However, the fact that J&J has paid $1 billion upfront after detailed due diligence, “gives us greater confidence that there may be more to the bapineuzumab data than was available to the market”, Mr Hunter added. He has changed its recommendation on the stock to ‘sell’ from ‘add’.
