Elan to restructure J&J deal after ruling

IRISH pharmaceutical firm Elan will have to restructure its €1 billion strategic development deal with US healthcare giant Johnson & Johnson (J&J) before the end of this month.

This became necessary after a New York court ruled that Elan had, by agreeing the deal, breached its existing collaboration with Biogen Idec relating to the multiple sclerosis drug Tysabri.

In July, it was announced that J&J would invest just over €1bn in Elan in return for an 18.4% of the entire company and a 50.1% stake in Elan’s Alzheimer’s immunotherapy programme.

That deal also gave J&J an option to give Elan money to acquire Biogen’s 50% stake in Tysabri, should Biogen itself be bought out.

Biogen took this case last month and it was initially supposed to have been heard at the end of August, but was put back to September 10 before being brought forward again to last Thursday. Elan issued a short statement on the matter, yesterday, which read: “We respect the court’s decision and the expedited attention in this matter.

“We are committed to working with Johnson & Johnson to close the transaction as quickly as possible, consistent with the Biogen-Elan Tysabri collaboration agreement.

“It would appear from Elan’s statement that it will not be appealing the decision. Elan now has until September 26 to cure the breach with Biogen Idec or it forfeits all rights to Tysabri,” said Ian Hunter of Goodbody Stockbrokers in a neat summing up of the matter, yesterday.

A number of possibilities have been mooted as to how Elan may now go about clearing up the issue — remove the Tysabri financing clause, give Johnson & Johnson & a larger share of the company or the AIP programme or the rights to another Alzheimer’s treatment (ELND005, which is currently in phase 2 trial stage) which Elan is co-developing with Canadian company, Transition Therapeutics.

“It [the Tysabri financing detail] was not seen to be the main reason for the deal in the first place — the AIP programme in Alzheimer’s was — and, indeed, the financing itself was not deemed material enough to be included in the initial announcement on the collaboration,” Davy Stockbrokers’ Jack Gorman said.

“However, we expect there to be some modest adjustment made to the shape of the overall J&J agreement to reflect this enforced alteration.

“While the court decision is disappointing for Elan, it doesn’t take too much to remedy the situation,” he added.

Elan’s share price actually rallied well yesterday afternoon — after earlier falling by 25c to €4.95 — finishing the day back in line with Thursday’s closing price of €5.15.