* Elan agrees to cede control of Tysabri to U.S. partner
* Elan has already spoken to companies about potential deals
* Biogen says deal a natural step, will add to 2013 earnings
* Irish company's shares rise 8 pct, highest since November
By Padraic Halpin
DUBLIN, Feb 6 Irish drugmaker Elan will
raise more than $3.25 billion by selling its interests in its
main drug to partner Biogen Idec and effectively
reinvent itself by splashing most of the cash on acquisitions.
Under a deal announced on Wednesday, Massachusetts-based
Biogen will take full ownership of blockbuster multiple
sclerosis (MS) treatment Tysabri and will make an upfront
payment to the Irish group plus royalties on future sales.
While the deal gives Elan scope to return some cash to
shareholders as well as strategic flexibility to buy new assets,
it leaves its future shape unclear since Tysabri was by far its
most important product, responsible for almost all its revenue.
Elan has already spoken to several companies about potential
deals and can move quickly over the next 12-18 months once the
sale is completed, Chief Executive Kelly Martin told Reuters.
"You can do a lot of things with $3 billion, you can buy
companies, molecules, you can partner, you can share risk. The
world is our oyster," Martin said in a telephone interview.
"We are not necessarily restricting ourselves to one
therapeutic area or one type of clinical asset. We will not be
restricted to our past, which was by and large neurological."
Martin said there were hundreds of small- to medium-sized
drug companies with capital or capability needs, meaning there
was an "enormous amount of transactions" Elan could do.
Shares in Elan, which fell sharply last year after the
failure of a highly anticipated experimental Alzheimer's drug,
were 8 percent higher at 8.30 euros by 1220 GMT. The stock rose
as high as 8.595 euros, its highest since mid November.
The Irish drugmaker has co-marketed Tysabri with the larger
U.S. company for 12 years and said it would receive a royalty of
12 percent of Tysabri global net sales for the first 12 months
after the deal is completed.
A tiered royalty structure will kick in after that, with
Elan, in which U.S. group Johnson & Johnson is an 18
percent shareholder, receiving 18 percent on up to $2 billion of
global net sales and 25 percent on any sales over that level.
Sales of Tysabri rose 8 percent to $1.6 billion last year. A
filing last month for approval to sell the drug as a first-line
treatment for multiple sclerosis could boost sales further.
The companies have long aimed to increase patient numbers
over time to 100,000 from the 72,700 at the end of last year, a
level that would make Tysabri a $2 billion drug, Martin said.
For Biogen, the deal boosts its MS business at a crucial
time for the U.S. company, which hopes to win approval soon for
a new pill to treat the debilitating neurological disease.
Its oral drug BG-12, to be sold under the brand name
Tecfidera, is expected to become a leading treatment for MS
after its planned second-quarter introduction.
It said the Tysabri deal, which will be paid for using
existing cash reserves, will add around $0.20 to $0.30 to 2013
earnings per share and continue to be accretive thereafter.
"This is a natural next step for Biogen and Tysabri. Full
ownership will improve our ability to navigate its role as part
of our leadership in MS," chief executive George Scangos said.
Biogen will be able to offer BG-12 alongside Tysabri and
another MS treatment called Avonex, both of which are given by
injection, providing a range of treatment options for patients.
Rival providers of MS treatments include Novartis,
Teva, Merck KGaA and Bayer.
There had been speculation in 2012 that Biogen might try to
acquire Elan outright, following the failure of the Irish
company's Alzheimer's drug bapineuzumab, which it was working on
with Johnson & Johnson and Pfizer.
That setback left Elan heavily reliant on Tysabri, which
accounted for all but 200,000 euros ($270,600) of the group's
1.2 billion euro full-year revenue reported on Wednesday.
As part of earlier plans to refocus its operations, Elan
said last August it was spinning off its Neotope drug discovery
business. It also sold its drug delivery business to U.S. firm
Alkermes for $960 million in 2011.
Martin, who said he will continue as CEO for the foreseeable
future after agreeing early last year to stay on longer than his
scheduled retirement, added that the situation of relying on one
asset and a single collaborator had not been ideal.
"The strategic direction can actually be shaped because we
have freed ourselves up from just having Tysabri to having the
ability to add a multitude of assets, which we think over time
will be a more balanced opportunity for shareholders," he said.
Citi and Ondra Partners are acting as financial advisors to
Elan on the deal, with Centerview Partners exclusively advising
Biogen. Cadwalader, Wickersham & Taft and A&L Goodbody are
acting as legal counsel to Elan, Ropes & Gray for Biogen.