Elan Corporation has taken its first step toward building a presence in the cancer drug market with the acquisition of the US-based Liposome Company in a $575 million (€596 million) deal.
"Elan has identified oncology as its next therapeutic area of interest," said Mr Donal J Geaney, Elan's chairman and chief executive. "Liposome enables Elan to enter that market with a platform from which we intend to develop an oncology business through product and strategic acquisitions."
Shares in Elan rose by 3.15 per cent to $40.93 3/4 on the New York Stock Exchange after the acquisition was announced yesterday. In Dublin, the shares lost 1.8 per cent to finish at €41.25 as the market initially reacted to the stock dilution element of the all-stock transaction.
But analysts described the acquisition as a good deal which formally moved the company into a new area, added to its salesforce in North America and complemented its existing range of technologies.
They said the 6 per cent premium over Liposome's closing share price last Friday also looked like a reasonable amount to pay for a company with good sales and several other products in the pipeline.
Liposome reported revenues of $86 million for its Abelcet drug for fungal infections, which is approved for sale in 24 markets, last year. The acquisition also gives Elan access to Liposome's pipeline breast cancer treatment, Evacet. It hopes to get approval for the drug in the European Union in the fourth quarter and bring it to the market next year.
According to Elan, there are other areas of interest within Liposome's pipeline, including two products and two new technologies, although Elan has yet to attribute a value to them.
In addition, Elan is hoping that Liposome's presence in the oncology market could help with the marketing of its ziconotide drug for treatment of severe chronic pain which is being reviewed by the US Food and Drug Administration (FDA).
Elan is acquiring Liposome in all-stock deal, under which Liposome shareholders will receive 0.385 of an Elan American Depositary Share (ADS), valuing each Liposome share at $15.28.
Elan may also make a cash payment to Liposome shareholders of up to $98 million. Of this, $54 million is contingent on the approval of Evacet for the EU. The balance of $44 million is contingent on Evacet achieving sales outside the US of $10.5 million a quarter before December 31st, 2002.
Excluding a one-time charge for the write-off of acquired in-process research and development, the acquisition is expected to be earnings neutral for Elan in the current year. It should add two to three cents to Elan's earnings per share in 2001, the company said.
Elan expects to complete the acquisition, which is subject to shareholder approval, in the second quarter. It has already entered into agreement with Ross Financial Corporation, which owns some 21 per cent of the Nasdaq-listed company, to vote for the transaction.
Liposome, which will account for around 6 per cent of the combined company, will operate as a separate business unit within Elan's pharmaceutical area.
