J&J buys $1b Elan stake, gains Alzheimer's R&D
Johnson & Johnson has agreed to pay $1 billion for an 18.4 percent stake in Irish drugmaker Elan Corp., and will acquire most of the rights to Elan's portfolio of experimental drugs to treat Alzheimer's disease.
(Elan co-markets a multiple sclerosis drug called Tysabri with Biogen Idec Inc. of Cambridge.)
The transaction, announced on Thursday, will give J&J an interest in bapineuzumab, a closely watched Alzheimer's drug in late-stage development that Elan is developing in collaboration with Wyeth. Wyeth is being acquired by Pfizer Inc.
Elan's shares rose 21 percent to $8.46 in mid-morning trading on the New York Stock Exchange. J&J shares lost nearly 1 percent to $56.52.
J&J and Elan will form a new company, in which Elan will hold a 49.9 percent stake. The company will be headed by a seven-person board, of which five members will come from J&J.
J&J will initially inject $500 into the new company to push forward the development of bapineuzumab. It will also take over Elan's current activities with Wyeth under their Alzheimer's drug program.
Elan, which has been under pressure from shareholders to reduce spending and maximize the value of the Alzheimer's program, said it will use the new funds to cut its debt 70 percent to about $400 million.
For J&J, the deal represents a leap into a therapeutic area in which it so far has almost no presence. It also represents a bet on bapineuzumab, a drug that some analysts had written off.
A mid-stage trial showed that while it helped some patients with a certain genetic profile, it raised the risk of potentially serious side effects in the brain.
The deal marks the end of an exhaustive review of more than 30 potential partners, Elan's chief executive, Kelly Martin, said on a conference call with analysts.
J&J said the transaction would dilute its adjusted earnings in 2009 by between 2 and 3 cents a share.
Elan said it will update its financial guidance on its next earnings call, but it expects to be profitable on a pretax basis by the end of 2010.
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