Just days after the monumentally expensive late-stage program for bapineuzumab went up in smoke, Elan's board has OK'd a move to split the company, spinning off its drug discovery unit into a new company with 80 staffers and about $130 million in cash to burn. The spinout leaves the money-maker Tysabri and a mid-stage program at Elan ($ELN), which is touting itself now as a solidly profitable company and inspiring fresh buzz as it pursues an apparent effort to make itself more attractive as a buyout target for Biogen Idec ($BIIB).
CEO Kelly Martin, who agreed to stay on through the final readout on bapineuzumab, insisted to reporters that the split--shedding a side of the company which better known these days for burning cash rather than producing new drugs--was long planned. But he did absolutely nothing to squelch talk of a potential buyout.
"What other companies want to do with regard to looking at our assets or any other assets is up to them--we're all public companies," he told reporters, according to a Reuters story. "There are no obstructions that we have put in place or that we seek to put in place."
Martin outlined plans to bank $120 to $130 million for the spinout effort, which is touting its efforts on tau and amyloid which hold the potential for three INDs by 2015. Elan will keep its interest in Tysabri, which is partnered with Biogen, along with ELND005, a Phase II/IIb neuropsychiatry drug. The Irish biotech will also keep 14% to 18% of the spinout, Neotope Biosciences.
Elan has lost considerable respect for its R&D work in recent years, leaving analysts eager to chalk up the move as a short-term move designed to tie a pretty ribbon around Tysabri for anyone interested in buying the company. ELND005 is the only other asset with a perceived value. And like GlaxoSmithKline's ($GSK) solo bid to snap up longtime partner Human Genome Sciences, the bustling biotech Biogen appears to be best suited to offering the most for the company.
Jefferies quickly concluded that a buyout certainly appears to be the intended goal here. "Jefferies thinks many will view Elan's announcement as the first step towards making the company more appealing for a takeover by Biogen," the group concluded. And that helped boost Elan's shares by 5% this morning.
Dale Schenk has been named the new CEO of the R&D spinout, which faces an uncertain future as a newly coined biotech with a hefty bankroll. The R&D operation burns $50 million to $60 million a year.
Elan sold off the bulk of its interest in the experimental Alzheimer's drug bapineuzumab to J&J and Pfizer, but retained a significant royalty interest. Researchers announced last week that they were pulling the plug on the drug after it failed a second late-stage study.
- here's the press release
- read the Reuters report
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