Biotech Values

[DewDiligence]

Elan Is Holding M&A Talks With Bristol-Myers

http://online.wsj.com/article/SB124363626491567807.html

›MAY 29, 2009, 6:38 P.M. ET
By DANA CIMILLUCA, JEANNE WHALEN and MATTHEW KARNITSCHNIG

Irish biotech firm Elan Corp. is in late-stage talks to sell a minority stake to Bristol Myers Squibb Co., a deal that could be a precursor to a full takeover of Elan, people familiar with the matter said.

Bristol Myers is one of two serious contenders for a stake in Elan that could also come with board representation and an ability to take control of the company later on, one of the people said. A deal could be reached as early as next week, though the talks could also break down. It is unclear who else is in contention and what the terms of any deal might be. Elan has a market value of roughly $3.3 billion.

The Dublin-based company, facing pressure from unhappy shareholders, in January said it hired Citigroup Inc. to help conduct a strategic review. At the time, Elan said it needed a partner with the cash and infrastructure to help it develop and market drugs. Chief Executive Kelly Martin later said that the company's preferred outcome would be to sell a minority stake to a drug company large enough to help Elan boost its global sales.

A spokeswoman for Elan declined to comment, as did a spokesman for Bristol Myers.

U.S. shares of Elan, which traded as high as $60 earlier this decade, rose nearly 4.0% to $6.98 Friday afternoon on the New York Stock Exchange.

Elan derives most of its sales from the multiple sclerosis drug Tysabri, which it markets with Biogen Idec Inc. of the U.S. Elan is also developing a closely watched drug for Alzheimer's disease with Wyeth, which recently struck a deal to be acquired by Pfizer Inc. Because of its ties to Biogen, bankers have said that anyone who does a deal with Elan would be in a strong position to ultimately buy the Cambridge, Mass., company as well.

Biogen has tried unsuccessfully to sell itself under pressure from activist shareholder Carl Icahn. Mr. Icahn has renewed his campaign against the company's management, which could lead to another sale process, bankers say.

A deal for Elan would be the latest in wave of pharmaceutical deals driven by the desire of bigger, more established players like Bristol to acquire innovative firms that can help them replenish their pipelines of drugs under development.

Any deal with Elan or Biogen would be risky, given investor concerns about the prospects for their drugs [no kidding]. Both companies' shares fell sharply last summer after Tysabri was linked to cases of a deadly brain infection. Elan was also hurt by questions surrounding the efficacy of the Alzheimer's drug.

Some Elan shareholders, frustrated with the company's performance and an expense structure they say is bloated, have called for Mr. Martin's ouster and a shakeup of the board. Mr. Martin and the board have defended their performance and said they've taken steps to cut costs.

Some of the dissident shareholders have also expressed opposition to doing any deal now, which they say would amount to selling stock at a depressed price.‹