Elan_1.jpgShares of Elan Corporation, PLC ( NYSE : ELN, ELN message board ) surged yesterday after the announcement that Johnson & Johnson is to acquire most of the rights and assets related to Elan's Alzheimer's Immunotherapy Program ( AIP – which includes an experimental drug for the treatment of Alzheimer's Disease). In addition, Johnson & Johnson will acquire a 18.4 % stake in the Irish drugmaker for the price of $1 billion.


The definitive agreement announced Thursday gives Johnson & Johnson a 25% stake in the Alzheimer's drug – named bapineuzumab, which Elan is developing in a 50 – 50 collaboration with Wyeth. Through a newly formed joint subsidiary company ( which Elan will own 50% of ), Johnson & Johnson will continue development of the drug and other aspects of the AIP with Wyeth - Johnson & Johnson reportedly prepared to spend an initial $500 million for further development of the drug, both companies contributing further as needs warrant.

The deal comes at a particularly portentous time for Elan, who had been actively searching for both a partner to help with the Alzheimer's Immunotherapy Program efforts, as well as an equity infusion to reduce debt - the proceeds from the deal will allow Elan to substantially reduce their $1.8 billion debt to around $400 million. As Lala Gregorek, a pharmaceutical sector analyst at Canaccord Adams in London, stated, “Elan has been under pressure to announce a deal for some time... Now they’ve delivered. It’s a pretty hefty deal.”

It is obviously extremely beneficial for Elan to be partnered with such a highly regarded company as Johnson & Johnson, who have such strong financing capabilities to bring to the table and are widely respected - and the almost even split of profits from bapineuzumab means that both companies have entered a deal that is mutually beneficial, provided the drug proves successful ( which is looking positive thanks to data presented at the American Academy of Neurology ).

After closing trading on Wednesday at $7.00, Elan opened Thursday at $8.33, to close the day at $7.60, after hours trading showing a further increase up to $7.69.

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