Johnson & Johnson buys 18% Elan stake

US healthcare giant Johnson & Johnson has acquired an 18.4% stake in Elan as part of an overall $1.5 billion (€1.07bn) investment.

The move effectively brings to a close the Irish pharmaceutical company’s six-month strategic review.

Elan has been seeking a tie-up with an international player to help fund the development of its pipeline of Alzheimer’s treatments and to de-risk its balance sheet, since the beginning of the year.

Despite several rumours in the last few months about a number of global pharma giants apparently sizing up the Dublin and Athlone-based company, management repeatedly said that the preferred option would be for a partnership deal, rather than a sale of the entire company.

Yesterday’s announcement detailed how Johnson & Johnson will now invest $1bn directly into Elan in return for an 18.4% stake in the company. An extra $500 million will be paid by the US group for a 50.1% stake in Elan’s Alzheimer’s Immunotherapy Programme – the pipeline (including the Bapineuzumab treatment) Elan is currently developing in conjunction with Wyeth. Elan will retain a 49.9% equity interest, share of profits and royalty payments in the pipeline.

As a result of yesterday’s news, Elan was – unsurprisingly – one of the biggest movers on Dublin’s ISEQ index of shares yesterday, rising by 19% (91c) to close at €5.70.

Elan’s management pointed to Johnson & Johnson’s status as seventh largest pharmaceutical company in the world, with a global sales and marketing network covering more than 100 countries, as the reason to go with this option.

Elan chief executive, Kelly Martin said yesterday that the company had attracted interest from 30 companies, since initially announcing its strategic review plans in January.

“The Johnson & Johnson business platform, global brand and world class expertise is exactly what we were looking for when we started our strategic review process,” he added.

The new deal will see a separate joint-venture company (consisting of a board of five Johnson & Johnson representatives and two from Elan) managing the Alzheimer’s pipeline. Johnson & Johnson will also be prevented – via a stand-still agreement – from acquiring any further Elan shares for the next five years, but it will have the option to have one representative on the main Elan board.

While this strategic review only related to its Alzheimer’s division, Elan also said yesterday that it wasn’t looking to sell any of its other assets at this time. That would seemingly remove the possibility of a sale of its drug delivery arm – Elan Drug Technologies (EDT) – which had been heavily mooted.