Elan shares have been on the rise since rumours that Bristol-Myers Squibb is interested in buying into the firm emerged but a report from analysts at UBS suggests that no such talks have taken place.
Roopesh Patel and Keyur Parekh at UBS issued a note to investors saying that B-MS has confirmed to us that it is not currently in talks to buy a minority stake in Elan,” They claim that Elan, like the US drugs major, is focused on specialty drugs and the value of a deal would hinge on successful trials of bapineuzumab, the Alzheimer’s diseasecompound being developed with Wyeth, “which in our view has meaningful development risks”.
Other analysts, however, believe that a partnership could make sense. Ian Hunter at Irish broker Goodbody noted that since Elan had hired Citigroup in January to perform a strategic review of options and, management noted that it preferred to see a third party to take a minority stake in the company, the likes of Pfizer, Roche and Lundbeck were linked with the firm. However, “this latest speculation, does, however, have a more solid ring to it”, he said.
Firstly, B-MS has the cash to do the deal and secondly, “over the last 18 months it has been developing its business through such alliances, which it terms its ‘string of pearls’ strategy’,” Mr Hunter noted. Thirdly, although it only has a couple of drugs at the early development stage, B-MS has “identified Alzheimer’s as one of its target indications going forward”.
At current prices, the New York-based group would have to pay $740-$925 million for a 20%-25% stake in Elan, giving it a 10%-12.5% stake in both the multiple sclerosis drug Tysabri (natalizumab), partnered with Biogen Idec and bapineuzumab. Mr Hunter adds that the money generated would not be sufficient for Elan to cover its 2011 debt obligations ($1.1 billion) but makes it much more manageable.
