Something for everyone in Elan deal

ANALYSIS: Elan’s sale of rights to its Alzheimer’s drug programme will dramatically cut its debt, writes DOMINIC COYLE.

ANALYSIS:Elan's sale of rights to its Alzheimer's drug programme will dramatically cut its debt, writes DOMINIC COYLE.

THE JEWEL of Elan’s Alzheimer’s pipeline proved to be the price of its longer-term financial security, as it always seemed likely to be.

Global pharmaceutical heavyweight Johnson & Johnson (J&J) has acquired almost all Elan’s rights and assets in the Alzheimer’s Immunotherapy programme (AIP) run in conjunction with Wyeth – crucially including the bapineuzumab drug that is currently in phase III trials.

The price tag offered something for everyone. Elan gets $1 billion that will dramatically reduce its net debt of $1.4 billion. The $500 million it was expecting to spend on the bapineuzumab and related programmes over the next three to four years can knock a further dent in the balance.

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On JJ’s side, the US giant has secured access to one of the more promising Alzheimer’s programmes around at what is, or it, a nominal cost. The $500 million it has committed to spend on the trials and any subsequent launch will not discommode the company. Of course, there is no guarantee that bapineuzumab will make it to market but the potential upside it huge.

If successful in the current trials, analysts have estimated that bapineuzumab could yield sales of $6 billion per annum.

Despite giving up control, Elan remains placed to take a substantial share of any profits from the drug through the 49.9 per cent shareholding it will hold in the new JJ subsidiary that will hold the assets.

Elan chief executive Kelly Martin noted yesterday that, in the US alone, there are 5.3 million people living with Alzheimer’s. Existing therapies only treat the disease’s symptoms not its progression, making it one of the major unmet needs in modern medicine.

From Elan’s perspective, the deal ticks other boxes. One of the major concerns for the company was the need to acquire access to a global commercial infrastructure for any roll-out of an Alzheimer’s drug. As the seventh largest pharmaceuticals group in the world, JJ has that network in place.

Martin also pointed yesterday to its long-standing commitment to emerging markets, particularly India and China. Projections for the numbers of patients with mild to moderate Alzheimers by 2050 is 100 million, with 65 per cent of those coming from emerging markets.

A peculiar feature of the deal is that the two companies driving the Alzheimer’s programme – Elan and Wyeth – will no longer be in charge of seeing any successful therapy to market.

Wyeth is in the process of being acquired by Pfizer in a $68 billion deal and now Elan has ceded control of its part of the Alzheimer’s Immunotherapy programme to Johnson Johnson as part of this deal. In both cases, the Alzheimer’s pipeline – which includes bapineuzumab, a drug that is entering phase III trials this autumn – was one of the key attractions for the suitors.

Ironically, Johnson Johnson was about the only major pharmaceuticals group not reported to be in talks with Elan over recent months. But in the end, it had the combination of financial muscle and commitment to get the deal over the line.

Elan’s chief financial officer, Shane Cooke, made a point yesterday by stating that the construction of the deal will ensure existing Elan shareholders continue to enjoy more than 80 per cent of the upside associated with Tysabri, the company’s drug technology business and the rest of its pipeline. The inevitable upgrades due to be announced by Cooke later this month will also cheer the company’s shareholders.