Bristol-Myers may purchase stake in Elan

BRISTOL-MYERS Squibb is reportedly negotiating to purchase a stake in Elan as the Irish-listed drug developer tries to shore up its finances.

A source close to the deal confirmed yesterday that talks were ongoing, but neither company would confirm this last night. Both Elan and Bristol-Myers, which has close to $8 billion in cash, said they did not comment on “rumour and speculation”.

Bristol-Myers Squibb is the second Elan suitor to be named within the past few months, with Dutch firm Lundbeck emerging as a potential bidder in March.

In January, Elan said it had engaged Citigroup to look at ways to support the firm’s finances, which are under pressure as it tries to finance expensive Alzheimer’s drug trials and repay more than $1 billion due in 2011.

Bristol-Myers Squibb chief executive James Cornelius has made no secret of his desire to do deals in the sector, while his counterpart in Elan has said the firm’s preferred option is a partnership with another drug company that would include the sale of a stake of up to 25 per cent. In February, the firm said “everything is on the table”.

Partnership deals coupled with the taking of minority stakes are not unusual in the sector. Pfizer, the world’s largest drugmaker, is acquiring Wyeth for $65 billion, while Merck Co is spending about $44 billion to buy rival Schering-Plough.

Bristol-Myers in early March formed a group of top managers to pursue deals and drug development.

If Elan does not complete a deal soon, it could run out of money before its Alzheimer’s trials are complete. The firm reported a first-quarter loss of $102.6 million this year, a 20 per cent increase from 2008. Sales of its multiple sclerosis drug Tysabri, which is marketed with Biogen Idec, rose 44 per cent over the same period, but have failed to reach the potential expected by many investors. Biogen has admitted that it will be “difficult” to achieve forecasts of 100,000 patients by 2010.

The reinvigoration of Tysabri sales has been a focus for the firm this year. Yesterday, Elan and Biogen issued positive guidance on the use of the drug for treating Crohn’s disease, noting it had improved the quality of life of some patients who are traditionally difficult to treat.

Elan’s shares were trading at €5.30 on Friday, having fallen almost 70 per cent from levels reached a year ago.

– (Additional reporting, Bloomberg)