Elan, J&J deal

Johnson & Johnson will form a new company to acquire Elan's rights to an Alzheimer's disease immunotherapy program that is partnered with Wyeth (NYSE:WYE, Madison, N.J.). The program includes four products targeting beta amyloid: two formulations of bapineuzumab, second-generation mAb AAB-002 and the immunotherapeutic conjugates ACC-001 and ACC-002. Elan retains rights to its small molecule programs in AD and will own a 49.9% stake in the newco. The biotech will be entitled to 49.9% of the newco's profits, plus tiered royalties. J&J will make a $1 billion investment in Elan through the purchase 107.3 million shares at $9.32, for an 18.4% stake. The price is a 33% premium to Elan's close of $7 on July 1, before the deal was announced. J&J also will provide up to $500 million in funding for the program's development and initial launch costs.

Elan will use the funds to develop its pipeline and reduce its net debt by more than 70%, to about $400 million. It expects to be profitable pre-tax and cash flow-positive by the end of 2010. Elan's lead clinical candidate is now ELND005 ( AZD-103), a small molecule that disaggregates beta amyloid fibrils in Phase II testing to treat AD. Outside AD, Elan has two small molecule "follow-ons" to Tysabri natalizumab in Phase I testing: ELND002 to treat multiple sclerosis and cancer; and ELND004 to treat ulcerative colitis and Crohn's disease. Elan has undisclosed rights to LY450139, a gamma secretase inhibitor in Phase III testing to treat AD that is partnered with Eli Lilly and Co. (NYSE:LLY, Indianapolis, Ind.). Tysabri natalizumab, a humanized mAb against integrin alpha(4), is marketed with Biogen Idec Inc. (NASDAQ:BIIB, Cambridge, Mass.) to treat MS and Crohn's in the U.S., and to treat MS in the EU. ELND005 is partnered with Transition Therapeutics Inc. (TSX:TTH; NASDAQ:TTHI, Toronto, Ontario). ...