PHILADELPHIA May 31 Irish biotechnology firm Elan Corp ELN.I is in advanced discussions to sell a minority stake to Bristol-Myers Squibb Co (BMY.N), a source familiar with the situation said on Sunday.
An agreement on the sale of the minority stake could come as early as this week, said the source, who declined to be identified by name because they did not have authorization to speak to the media.
Elan is also in talks with a second suitor, but the status of those discussions was unclear.
Selling a minority stake could be the first move in a multistep transaction to sell Elan outright, the source said.
Elan and Bristol-Myers both declined to comment.
In January, Elan hired Citigroup to conduct a strategic review of its business, which it said at the time could lead to a sale or merger of the company.
Elan was under pressure at the time from investors critical of Chief Executive Kelly Martin's leadership and the state of the biotech company, which was burning through cash at a rapid rate. In its most recent quarterly earnings report it posted a net loss of almost $103 million.
Martin told reporters in April that a partnership, rather than a merger, may be Elan's best option.
"The best option for Elan would be to have a partnership with a large pharmaceutical company," Martin said at the time.
Biotechnology company Biogen Idec Inc (BIIB.O) and Elan jointly market the multiple sclerosis drug Tysabri. Drugmaker Wyeth WYE.N, currently being acquired by Pfizer (PFE.N), and Elan are jointly developing the experimental Alzheimer's drug bapineuzumab. These are currently Elan's two most important products.
Bristol-Myers or a company unrelated to Elan may have difficulty making a full acquisition for the Irish biotech company because of those drug partnership agreements.
Biogen and Wyeth have change of ownership clauses that allow them to buy out the two drugs, which together make up the bulk of Elan's value.
Earlier this month, Danish pharmaceutical group Lundbeck (LUN.CO), which had been rumored to be eyeing Elan, ruled itself out as a possible buyer of Elan.
Lundbeck said tight credit-market conditions made it impossible to buy a company the size of Elan. Elan has a market value of about $3.6 billion, while Lundbeck's market capitalization is roughly $4.4 billion. (For more M&A news and our DealZone blog, go to here)