January 18, 2009 / 3:12 PM / 10 years ago

UPDATE 1-Denmark's Lundbeck interested in Elan - report

(Adds Lundbeck, analyst comment, background)

DUBLIN, Jan 18 (Reuters) - Danish pharmaceutical group Lundbeck (LUN.CO) is interested in acquiring Irish biotechnology firm Elan ELN.I, the Sunday Independent newspaper reported, without citing sources.

Elan said this week it had hired Citigroup to conduct a strategic review that could lead to a sale or merger of the company, sending its shares up 16 percent to a 12-week high.

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

Lundbeck spokesman Mads Kronborg said the Irish report sounded as if it was based on an analysis in Danish business paper Borsen on Friday, which maintained that Elan would be a good strategic fit for Lundbeck.

“That was based on speculation, and ... we never respond to or comment on rumours,” he said.

Lundbeck’s biggest drug is antidepressant Cipralex, sold in the United States as Lexapro. It faces generic competition for the drug in major markets starting in 2012 as patents run out.

Lundbeck has repeatedly said it is looking for deals to boost its post-Cipralex prospects but was burned last year when its Flurizan failed in a late-stage trial, shortly after Lundbeck had paid $100 million to Myriad Genetics (MYGN.O) for European rights to the Alzheimer drug.

A Denmark-based analyst who requested anonymity said that although Lundbeck was looking for ways to shore up revenue, Elan was probably too big a bite for the Valby-based group to swallow, given the current financing climate.

Elan’s share price 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, which has a market value of around $3.4 billion, said a range of alternatives for its future could include a minority investment or strategic alliance, a merger or a sale. It also said it was committed to completing the strategic review as promptly as practicable.

Lundbeck has a market capitalisation of $4.2 billion. The charitable Lundbeck Foundation owns about 70 percent of the shares in the group.

A number of 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.

(additional reporting by Kim McLaughlin in Copenhagen)

editing by John Stonestreet

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