Elan Corp. plc says spinning out its drug discovery and preclinical assets will give investors a choice - a profitable Elan with a growing revenue stream from autoimmune drug Tysabri natalizumab, or a pure-play science company. The question is whether splitting the company will unlock value or magnify the problems of each half.

Elan this month announced plans to focus on late-stage programs and spin out its discovery business into Neotope Biosciences plc. The newco will be public, with four preclinical programs. Elan will hold a 14-18% stake and seed Neotope with about $120-$130 million, which may not be enough to get the newco into the clinic.