J&J to buy $1b stake in drug maker Elan
LONDON - Johnson & Johnson agreed to pay $1 billion for a stake in Elan Corp. and will develop the Irish drug maker’s medicines against Alzheimer’s disease.
Elan surged as much as 40 percent in Dublin trading after the announcement. J&J, the world’s biggest healthcare company, will get 18.4 percent of Elan and create a unit to hold the Alzheimer’s medicines that Elan is developing with its partner Wyeth, the companies said in a statement yesterday. Wyeth agreed in January to be acquired by Pfizer Inc., the world’s biggest drug maker, in a deal set to close by year’s end.
The agreement gives J&J rights to bapineuzumab, one of the most advanced Alzheimer’s drugs in development. Drug makers have raced to develop treatments for Alzheimer’s as the number of patients with the brain-wasting condition is expected to double to 34 million within 16 years, according to the World Health Organization.
“It’s a good strategic and tactical investment,’’ said Jan David Wald, a Boston-based analyst for Noble Financial Group Inc., in a telephone interview. J&J “needs to shore up its near-term pipeline and also support its long-term pipeline, and I think it gets both from this deal.’’
The deal sent Elan’s US shares up 60 cents, or 8.6 percent, to close at $7.60. J&J shares fell $1.09, or 1.9 percent, to $55.98.
J&J pledged an initial $500 million to pay for Elan’s share of the development costs for drugs including bapineuzumab and a vaccine for Alzheimer’s disease. In return, Elan will get 49.9 percent of the newly formed company, according to the statement.
Based in New Brunswick, N.J., J&J will share the rights to the products with New York-based Pfizer Inc.
Elan chief executive Kelly Martin said Pfizer’s takeover of Wyeth will not affect development of bapineuzumab or other Alzheimer’s assets.
The agreement gives Elan most of the money needed to repay $1.1 billion in debt due in November 2011, while ensuring funding to develop bapineuzumab. Martin said last month the Dublin-based company would have about $200 million of cash and investments at the end of the year.
Elan “managed to pull off a good deal,’’ said Ian Hunter, an analyst with Goodbody Stockbrokers in Dublin. “Given the assumed position the company was in, it was a good achievement.’’
