Elan has evidently found a buyer for its drug-delivery unit, Elan Drug Technologies (EDT), in the form of drug-delivery specialist Alkermes. At a bid of $960 million, the proposed deal lands at the low end of the range that analysts had forecast when Elan first announced plans to sell off the group (see the [April 20, 2010 LRTJ – client registration required).
Elan is not profitable and has only one strong candidate drug in its pipeline: Bapineuzumab for treating Alzheimer’s. As we noted last August, when the company retreated citing adverse market conditions, divesting EDT leaves Elan focused solely on neurological drugs – a vastly riskier technical and financial proposition (see the August 24, 2010 LRTJ – client registration required). At the same time, the already-profitable EDT will convert Alkermes’ once certain 2012 loss into a profit.
At first blush, it may seem counter-intuitive for Elan to swap profit for risk in this way. At second, third, and fourth blush, it still seems that way. Given the failure of so many neurological drugs in late-stage trials – not to mention past product failures and even deaths for Elan – and the company’s still-meager means to take a drug to market, it’s bewildering that the company would bet everything on a cure for an intractable, slow-to-develop disease like Alzheimer’s. The only saving grace of the deal with Alkermes is that it makes Elan a more attractive takeover target for its partner Johnson & Johnson, which is deeply tethered to Elan. But barring a remarkable success with Bapineuzumab, there is little hope that Elan will survive the major self-surgery it has just undergone.
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