Elan Corp is selling its drug technology unit to the USA's Alkermes in a cash and stock deal valued at $960 million.
Specifically Alkermes will merge with Elan Drug Technologies (EDT), the "profitable, world-class drug formulation and manufacturing business unit" of the Irish firm and the entity will be combined under a new holding company incorporated in Ireland. Elan will receive $500 million in cash and 31.9 million ordinary shares of Alkermes.
The Dublin-headquartered firm has been looking at alternatives for EDT for some time. In August last year, Elan decided to put off a sale or spin-off, saying it had “concluded that it makes strategic and financial sense to separate the business, provided that a separation can be done at an appropriate valuation”. However, market conditions at the time were not conducive.
New Alkermes to get revenues from 25 products
It seems the time is now right to sell off EDT and last year its revenues were up 15% to $78.5 million, helped by Acorda Therapeutics' new multiple sclerosis drug Ampyra (fampridine prolonged-release) tablets. The new Alkermes, which will be headquartered in Dublin, will have "diverse revenue streams from 25 commercialised products", with future near-term growth expected to be driven by five major drugs.
As well as Ampyra, these treatments are Johnson & Johnson's antipsychotics Risperdal Consta (extended-release risperidone) and Invega Sustenna (paliperidine palmitate extended-release), plus its own alcoholism drug Vivitrol (naltrexone for extended-release injectable suspension) and the type 2 diabetes Bydureon (extended-release exenatide), developed with Eli Lilly and Amylin and the long-acting once-weekly version of Byetta.
$450 million in revenues
The combined company is expected to have product, royalty and manufacturing revenues in excess of $450 million annually and "resources to prudently invest in an innovative pipeline of proprietary drugs".
Elan chief executive Kelly Martin said the transaction "aggressively advances a number of long-standing strategic and financial objectives" for the firm. Namely, the deal enables it to reduce debt and allows for "additional focus and continued disciplined investment in a broad array of opportunities within the neurology space".
Mr Martin added that the pact "provides Elan shareholders with the opportunity to realise further value – over time – from the equity position in Alkermes plc”.
His counterpart at Alkermes, Richard Pops, who will head up the new entity, said the merger will "bring the scale and resources for strategic and balanced investment across the whole product continuum, from R&D innovation to clinical development, to world-class manufacturing and commercial expansion".
The link-up has gone down well with analysts and the shares of both Alkermes and Elan rose on the news.