We’ve been following the Elan-JnJ tussle over Tysabri since last July, after Elan entered into a deal with Johnson & Johnson, giving 18.4% of the company in return for support of its Alzheimer’s initiatives. The deal had soured Elan’s relationship with Biogen Idec because JnJ would now receive a cut of profits from Tysabri, the collaboration’s best-selling Multiple Sclerosis drug.
Elan gave away first right of refusal to JnJ in $1 billion deal
As it turns out Elan had given away more than what we initially thought. Apart from the 18.4% stake in the company, Elan also handed over 50.1% stake of all of its advanced Alzheimer’s drug development initiative, one that includes bapineuzumab. For the $1 billion investment from JnJ, Elan seems to have given Biogen the right of refusal on Tysabri, and JnJ the right of refusal on bapineuzumab.
Investors are now upset, not just about the nature of this deal but also about the low-profile disclosure from Elan. The way this news got out is, in itself, an indication of what could be on the minds of Elan’s management. While Elan has always been on the top list of possible acquisitions, the current deal places it in a limbo – not desirable for acquisitions thanks to what looks like a handover of key assets to partner companies.
All for deterring the possibility of getting acquired
The interesting aspect of Elan’s strategy is that it seems to be entering such deals only to avoid becoming a takeover target. Its annual report mentions that “we are party to agreements that may discourage a takeover attempt that might be viewed as beneficial to our shareholders“. However it’s strange how Elan is going about doing this – first with Tysabri and now with bapineuzumab. Bapineuzumab is being co-developed by Elan and Pfizer. With JnJ now coming into the picture, 50% of bapineuzumab’s stake would be shared by both companies (Elan and JnJ). The right of refusal option allows JnJ to acquire all of Elan’s stake if it finds bapineuzumab to become successful on the market.
While this play of company strategies is fun and interesting in itself, we can observe how the market for neurological disease treatments is heating up among the major market players. We’ll continue to follow developments with Elan as they seem to be deciding the fate of two key drugs on the market – Tysabri and Bapineuzumab.
