Ireland's Elan hires Citi to weigh sale of company

LONDON/DUBLIN (Reuters) - Elan Corp Plc (ELN.I) has hired Citigroup to conduct a strategic review that could lead to a sale or merger of the company, Ireland's top drugmaker said on Tuesday, sending its shares sharply higher.

The move follows criticism from some major investors about the biotechnology company's direction, including a call from one big shareholder for Chief Executive Kelly Martin to step down.

Elan's stock has fallen by two-thirds over the past six months amid concern over the safety of its multiple sclerosis drug Tysabri and disappointing results from a trial of its experimental Alzheimer's medicine.

The group said a range of alternatives for its future could include a minority investment or strategic alliance, a merger or a sale. It added it was committed to completing the review as promptly as practicable.

Shares in Elan jumped 16 percent to 6.92 euros by 0900 GMT (4 a.m. EST) on takeover hopes.

Industry analysts said the move could unlock value at Elan but an outright sale of the group would not be simple.

"Any take-out would be messy given Elan's 50:50 joint ventures with Biogen Idec (BIIB.O) and Wyeth on Tysabri and (Alzheimer's drug) bapineuzumab, respectively," said Ian Hunter of Goodbody Stockbrokers.

One possibility would be to sell the company to one of these partners with the approval of the other, he added. Non-related companies would find buying Elan tricky, since 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.

BIOTECH M&A

Many large pharmaceutical companies are currently looking to acquisitions in biotech to boost their pipelines of new drugs and sustain future revenues as older blockbusters lose patent protection.

Last week, Dutch-based Crucell (CRCL.AS) announced it was discussing a takeover by Wyeth, while Roche (ROG.VX) is locked in a battle to acquire the rest of Genentech DNA.N it doesn't own in what would be the biggest biotech deal ever.

With a market value of around 3.2 billion euros ($4.3 billion) Elan would be a manageable acquisition for most of the world's top drugmakers.

There was speculation last week that Pfizer (PFE.N), the world's largest pharmaceuticals concern, might be looking at Elan but an Elan company spokeswoman told Irish radio the Citigroup review was not related to the Pfizer rumours "at all."

She added that a sale of the business was not the preferred option, saying: "That's the last alternative quite frankly -- that's not optimal."

Elan, which is not generating a profit and has $1.7 billion in debt coming due within the next five years, could face financing challenges if the credit crisis continues.

It tried last year to sell its drug delivery technology business but it failed to find private equity buyers with the necessary finance to conclude a deal.

Last month, it announced plans to save $20 million to $25 million by shedding 114 jobs and closing its Tokyo and New York offices.

Elan said it did not plan to release additional information about the status of the strategic review until a definitive agreement is entered into or the process is otherwise completed.

($1=.7461 Euro)

(Editing by Chris Wickham)