Elan orchestrates $693M biotech buyout, $90M spinout in deal frenzy

In a dealmaking frenzy, cash-rich Elan ($ELN) has agreed to pay up to $693 million for a biotech company focused on rare diseases, picked up a big share of a start-up specialty pharma company based in Dubai, spun out its sole remaining clinical asset into a new company with $90 million in financing and set up an $800 million debt offering to help keep the deals coming.

Kelly Martin

Elan CEO Kelly Martin has chosen AOP Orphan Pharmaceuticals as the company's first acquisition. The Vienna-based biotech is being acquired for $342.5 million in cash and stock with up to $351 million in milestones. The biotech has about 145 staffers working on four late-stage programs for hematology and cardiology. Just a few months ago AOP reported that it had reaped positive mid-stage data for a new treatment for polycythemia vera--a condition involving the blood-building cells in the bone marrow--paving the way for a planned pivotal trial.

Elan opted to spin out its mid-stage neuropsychiatry drug ELND005--which has a lead indication for aggression among Alzheimer's patients--into a new company dubbed Speranza Therapeutics. Elan is providing $70 million in financing with an option to contribute $8 million more, keeping 18% of the company. An unnamed third party is contributing $20 million for a 62% equity stake, with the rest going to management.

The specialty pharma company, Newbridge Pharmaceuticals, acquires approved drugs for marketing in Africa, the Middle East and Turkey. Elan paid $40 million for a 48% stake in the company and has an option to buy out the rest for $244 million in 2015.

Elan has been weaving an intricate plan to invest its $3.25 billion windfall from its Tysabri deal with Biogen Idec ($BIIB). In addition to stock buybacks, Elan also recently completed a controversial deal to buy a share of Theravance's royalty stream on approved and experimental COPD drugs for $1 billion. This new package of deals still leaves considerable financial firepower for more acquisitions in the coming months as Elan starts over, building a new company from the ground up.

These new deals are also likely to help squelch Royalty Pharma's bid to buy up the company's cash and royalty streams before Martin had a chance to spend the money on new assets.

"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," says Elan Chief Financial Officer Nigel Clerkin. "All of these are underpinned by a strong balance sheet as well as a highly efficient and strategically advantageous tax structure."

- here's the press release