J&J Invests $1.5 Billion in Deal with Elan

Johnson & Johnson (J&J, New Brunswick, NJ) agreed to pay $1.0 billion to acquire the assets and rights of the Alzheimer’s immunotherapy program (AIP) of the biopharmaceutical company Elan (Dublin, Ireland), form a new company with Elan based on the AIP, and gain an 18.4% stake in Elan. In addition, J&J plans to commit up to $500 million to fund the development and launch of bapineuzumab, the lead drug candidate in the AIP.

Elan’s AIP represents the company’s interest collaborating with Wyeth (Madison, NJ) to research, develop, and commercialize select products to treat or prevent neurodegenerative conditions, including Alzheimer’s disease. Through one of its affiliates, J&J will assume and continue Elan’s activities with Wyeth under the AIP, which includes the initial $500-million commitment to fund the development and launch of bapineuzumab. The agreement provides for additional funding obligations of the parties if needed.

In consideration for transferring its rights and assets of the AIP to J&J, Elan will receive a 49.9% equity interest in the newly formed J&J company that will acquire the AIP. Elan will be entitled to a 49.9% share of the profits and certain royalty payments upon the commercialization of products under the collaboration with Wyeth.

Bapinezumab is a humanized monoclonal antibody that provides patients with an antibody to beta amyloid. Beta amyloid is a component of the neuritic plaques that are implicated in the pathology of Alzheimer’s disease. Bapinezumab has received fast-track designation from the US Food and Drug Administration as a potential treatment for patients with mild to moderate Alzheimer’s disease. An intravenous formulation of bapinezumab, administered once every three months, is in Phase III clinical trials. A subcutaneous formulation, administered once per week, is in Phase II trials. In addition to bapinezumab, the AIP includes other compounds being evaluated for slowing the progression of Alzheimer’s disease. An Alzheimer's vaccine (ACC-001) is also under development.

The boards of directors of J&J and Elan have approved the transaction, which is subject to antitrust and customary closing conditions. The deal is expected to close in the second half of 2009.

Elan’s deal with J&J follows a recent strategic review by Elan and subsequent restructuring. Elan is organized into two operating divisions: biopharmaceuticals and drug technologies. In February 2009, Elan announced several changes to its operations, which included a postponement of its biologics-manufacturing activities, a strategic redesign and realignment of the research and development organization within its biopharmaceutical business, and a reduction in related general and administrative costs and other support activities.

These changes followed the realignment of components of Elan’s commercial organization announced in late 2008.