Elan, a biotechnology company based in Ireland, announced a series of transactions designed to decisively transform and advance the company. Upon shareholder approval, the totality of these strategically driven decisions, in addition to the Theravance royalty participation agreement, the dividend pass through, and the completed Tysabri transaction, will form a dynamic and unique business foundation for Elan in the years ahead.
"Our proposed package of transactions is designed to create a balance of risk (science, molecules, regulatory and reimbursement) with the benefit of diversification (therapeutics, geographies, science and operational constructs) to produce long-term growth in income and value,” said Kelly Martin, CEO of Elan. "Our goal is to create a company that achieves distinct and sustainable success in the health care space. We are not constrained by legacy infrastructure nor associated costs. We will operate flexible business constructs that allow for participation in various parts of the industry value chain for the direct benefit of our shareholders. The resulting ability for effective long-term planning enables us to generate significant after tax margin through advantageous tax structures."
The first proposed transaction is the100% acquisition of AOP Orphan Pharmaceuticals, a Voemma-based company focused on rare and orphan diseases. Upon close, Elan will pay $340 million for the company, comprised of $227 million in cash and $113 million of Elan ordinary shares. In addition, there will be potential cash milestone payments of up to $349 million on the advancement (filing and acceptance) of certain late stage clinical programs.
A second transaction, which Elan has already begun, is the investment in Newbridge Pharmaceuticals, a specialty pharmaceutical company based in Dubai. Elan has paid $40 million in exchange for 48% of the total fully diluted capitalization of the company. In addition, Elan has appointed two directors to thebBoard of Newbridge. Elan has the option to purchase the remaining stake in Newbridge by 2015 for a sum of $244 million.
"AOP Orphan and Newbridge Pharmaceuticals together create a highly unique business platform,” said Hans Peter Hasler, COO of Elan. “The geographic markets in which they operate are characterized by underlying growth and demand for health care products, broad economic development and increased patient and caregiver knowledge in disease areas such as oncology, cardiovascular-pulmonology, hematology, gastroenterology, neurology and a variety of rare and orphan diseases. We look forward to working together with Dr. Widmann and Joe Henein and their teams to grow, advance and leverage their respective business platforms."
Elan has also proposed divesting ELND005 (Scyllo-inositol) to Speranza Therapeutics. ELND005 is currently indicated for bi-polar disorder, agitation/aggression in Alzheimer's disease and Down syndrome. Elan will commit $70 million to the new entity upfront (plus up to a potential future $8 million) for an 18% minority equity position, royalties in major markets along with additional milestones, and retention of commercial rights in certain territories and markets. The third party equity financial partner will commit $20 million for 62% equity position (plus up to a potential future $2 million). The remaining 20% equity will be allocated among Speranza management. This allows Elan to eliminate the operating activities associated with the development of the drug (2013 estimated spend:~ $80 million), while at the same time maintaining a share of the potential upside.
"Upon approval and closing of this set of transactions, the Elan business would be comprised of very high net margin, multi-asset and long term revenue streams (within multiple sclerosis and respiratory), an orphan disease platform and a strong regional commercial presence,” said Nigel Clerkin, CFO of Elan. “All of these are underpinned by a strong balance sheet as well as a highly efficient and strategically advantageous tax structure."
In accordance with the Irish Takeover Rules, Elan will convene an Extraordinary General Meeting (EGM) to be held on Monday, June 17, to obtain the requisite shareholder approval. Notice of the EGM, containing all relevant information, will shortly be sent to shareholders.
Elan's financial advisors include Davy Corporate Finance, Morgan Stanley, Ondra Partners, Citi, Evercore Partners and Ponthieu Partners. Elan's legal advisors are Cadwalader, Wickersham & Taft, A&L Goodbody, Schoenherr and Allen & Overy.