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In a joint statement, the companies noted that the investment by Johnson & Johnson, through its affiliate, would be in exchange for Elan's newly issued American Depositary Receipts, or ADRs, which will represent 18.4% of latter's outstanding ordinary shares. The investment would provide financial flexibility for the Ireland-headquartered neuroscience-based biotechnology company.
Following the transfer of its rights and assets, Elan will receive a 49.9% equity interest in the newly formed Johnson & Johnson company that will acquire the AIP Program. The company will also be entitled to a 49.9% share of the profits and certain royalty payments upon the commercialization of products under the collaboration with Wyeth.
Earlier this week, the Sunday Times had reported that Swiss drug maker Novartis AG (NVS | Quote | Chart | News | PowerRating) is in talks to buy certain operations from Elan, including Elan's flagship multiple sclerosis treatment Tysabri and its Alzheimer's disease pipeline. According to reports, Elan, on June 10, had said that it expected to conclude a strategic transaction 'in the near term', after talking with a number of pharmaceuticals and biotechnology companies over the past few months.
Elan had hired Citigroup Global Markets Inc. in January to conduct a review of a range of strategic business alternatives, which include minority investment or a strategic alliance, a merger or sale. Elan then had said that its goal is to secure access to the necessary financial resources and commercial infrastructure to accelerate the development and commercialization of its pipeline and product portfolio.
Johnson & Johnson and Elan currently said that Elan's AIP Program represents its interest in a collaboration with Wyeth to research, develop and commercialize selective products for the treatment and/or prevention of neurodegenerative conditions, including Alzheimer's disease. The gross assets attributable to the AIP Program as at December 31, 2008 were US$63.1 million, while costs associated with the AIP Program in respect of the year 2008 were approximately US$113 million.
The companies said that the AIP Program includes multiple compounds being evaluated for slowing the progression of Alzheimer's disease, of which the lead compound, bapineuzumab, administered intravenously once every three months, is currently in Phase 3 clinical trials. Further, a subcutaneous formulation, administered once a week, is currently in Phase 2 trials, and a vaccine for Alzheimer's disease, ACC-001, is also under development.
Following the purchase, Johnson & Johnson, through its affiliate, will assume and continue Elan's activities with Wyeth under the AIP Program. J&J will initially commit up to $500 million to continue the development and launch activities of bapineuzumab, a potential first-in-class treatment that is being evaluated for slowing the progression of Alzheimer's disease, as well as other compounds. The companies noted that the agreement provides for additional funding obligations of the parties if needed.
The boards of directors of both companies have approved the deal, which represents the culmination of an in-depth strategic review by Elan. The transaction is conditioned on clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.
Upon the closing, the deal is expected to have an estimated dilutive impact of $0.02 to $0.03 on Johnson & Johnson's 2009 adjusted earnings per share.
Elan Chief Executive Officer, Kelly Martin, stated, "This transaction will leverage Elan's unique scientific and clinical work and leadership in bringing treatments to market that potentially slow the progression of Alzheimer's disease."
Husseini Manji, Global Therapeutic Head, Neuroscience, Johnson & Johnson Pharmaceutical Research & Development, added, "This transaction will be a key component in achieving our vision to develop treatments that target underlying disease biology, thereby helping to prevent some of society's most devastating illnesses. We expect to focus our resources on bringing the AIP Program to fruition as quickly as possible because of its potential to slow the progression of Alzheimer's disease."
JNJ is currently trading at $56.41 on NYSE, down $0.67 or 1.17% on a volume of 4.16 million shares.
ELN is currently up $1.20 or $17.29% at $8.32, on a volume of 20.83 million shares. ELA.L is currently at 5.85 euros, up 1.13 euros or 23.99%, on a volume of 1.18 million shares.
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