Elan Separates Discovery Activities into Neotope

Elan today has announced that they have decided to spin off of their discovery science and Neotope Biosciences divisions into a separate business entity “to create two independent, highly focused, public companies.”

After the separation, Elan will hold three key assets: the multiple sclerosis blockbuster Tysabri and its other potential indications; ELND005, a Phase II/Phase IIb ready small molecule being tested in a range of neuropsychiatry and symptomatic diseases; and the sustained interest in Janssen AI, which includes Phase II bapineuzumab.

According to the company, the spin off will result in the organisation becoming immediately profitable and a high growth business.  The company will keep its head office in Dublin, Ireland, accommodating roughly 90-100 employees.

It is expected that Elan’s earnings in 2013 will pass $400 million with projected net income of over $250 million, while earnings per share of $1.00 are planned by 2015.

Neotope Biosciences, which was originally established in 2010, will function as a separate drug discovery business platform, largely concentrated on identifying and transforming targets into potential therapies for chronic degenerative diseases.

The new organisation will also be based in Ireland, but will have operations in South San Francisco, California, with roughly 80 employees.

Elan confirmed that they will insert $120-$130 million start-up capital into Neotope in exchange for between 14% and 18% equity, adding that the latter could possibly have three new INDs by 2015.

Logical Step

Commenting on the change, Robert Ingram, Elan chairman, labelled it as “a bold and logical strategic step” that will provide shareholders with “the ability to delineate risk, timelines and business characteristics to their own specific investment objectives.”

“By establishing Neotope Biosciences and Elan as distinct businesses – each with its own specific business characteristics and dynamics – we provide investors with important clarity, transparency and choice as it relates to their investment decisions,” commented Kelly Martin, Elan’s chief executive.

The business was also keen to emphasise that the recent failure of bapineuzumab in Phase III trials for Alzheimer’s disease was not related to the decision to split operations, commenting that discussions “took place well in advance” of the release of top-line data from the studies.

Biogen Idec

The has increased speculation that Elan, rid of its loss-making research arm, will be an increasingly attractive takeover target for biotech company Biogen Idec, with which they market multiple sclerosis drug, Tysabri.

Some analysts believe Biogen could decide to use the opportunity to take 100% of Tysabri by buying Elan.

When asked about Biogen’s potential bid interest, Kelly Martin declined to comment, but informed reporters that there were no obstacles to any company launching a takeover offer, and none are planned under the new structure.

“What other companies want to do with regard to looking at our assets or any other assets is up to them – we’re all public companies,” Martin noted.  “There are no obstructions that we have put in place or that we seek to put in place.”

Conclusion of the spin-off, which is subject to shareholder approval, is expected by the end of 2012.  Elan’s shares were 0.7% higher by 10:05 GMT today, valuing the group at roughly $6.6 billion.


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