Elan Sells EDT Unit To Alkermes To Generate Cash, Cut Debt
May 09 2011 - 4:46AM
Dow Jones News
Elan Corp. PLC (ELN) Monday sealed a transformational deal to
sell its drug technology unit EDT to U.S.-based Alkermes Inc.
(ALKS) in a deal valued at $960 million that allows the Irish drug
maker to pay down debt and fund pipeline development.
EDT and Alkermes will be combined under a new holding company
incorporated in Ireland. The combined group, in which Elan will
have a 25% stake, will focus on products dealing with the brain and
is expected to have annual revenue of around $450 million from 25
products, including treatments for schizophrenia and pain.
Elan said the spinoff of EDT--a long-standing aim--will allow it
to become a pure neurology-based biotech business with adequate
funding.
"This allows us to reduce debt and have a lot of cash for
investment in the research and development part of the business,
which is key for Elan, and it allows us to take financial risk off
the table and invest in our science and our assets in the
intermediate term, which has been a long-term goal of the company,"
Elan's Chief Executive Kelly Martin told Dow Jones Newswires.
Martin said the restructured company will be able to focus more
on its flagship multiple sclerosis treatment Tysabri which it
manufactures and sells along with its U.S. joint venture partner
Biogen Idec Inc.'s (BIIB).
Multiple sclerosis is a chronic, inflammatory condition that
occurs when the body essentially attacks its own central nervous
system and can be disabling in advanced stages.
"Tysabri's growth is very significant and continues to
accelerate," Martin said, adding that the medicine's growth
potential outside the U.S. looks especially promising.
The new entity will be called Alkermes PLC. Richard Pops,
currently chairman, president and CEO of Alkermes, will serve as
Alkermes PLC's chairman and chief executive.
Elan's Chief Financial Officer Shane Cooke, who is also
currently head of EDT, will join the new holding company as
president. Nigel Clerkin will be Elan's CFO on an interim
basis.
In 2009, U.S.-based Johnson & Johnson paid $885 million for
an 18.4% stake in Elan and acquired rights to advanced research
into drugs for Alzheimer's disease, representing most of the value
credited to the Elan Alzheimer's pipeline at the time.
Martin said the sale of its EDT business "will allow us to focus
even more on the area of neuro degenerative diseases with
significant strategic and financial flexibility. It's a very
shareholder-friendly transaction."
The market seemed to agree, and at 0805 GMT Elan shares were up
11%, or 53 cents higher, at EUR553. The share is up 7.5% on
year.
-By Sten Stovall, Dow Jones Newswires; +44 207 842 9292;
sten.stovall@dowjones.com
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