Elan sells formulations unit to Alkermes for $960m
pharmafile | May 10, 2011 | News story | Manufacturing and Production | Alkermes, Elan
Irish drugmaker Elan has finally found a buyer for its Elan Drug Technologies unit, which has been on and off the block for years.
US drug delivery specialist Alkermes has come forward with a cash and equity offer to merge with Elan’s contact manufacturing and formulation unit and create a new company – Alkermes plc – which will be headquartered in Ireland.
The combined company will have sales of around $450 million a year and will be led by Alkermes’ chief executive Richard Pops. Alkermes has agreed to pay Elan $500 million in cash alongside shares currently valued at around $460 million.
“The merger will be financially transformative and create a profitable, global biopharmaceutical company with a diversified CNS product portfolio and a strong foundation for growth”, commented Pops, who has assured staff at EDT that no jobs are threatened as a result of the merger.
Elan has been trying to sell EDT for some time in order to pay down its debt, but dropped plans in 2008 citing unfavourable market conditions. Last year, the proposition of a separation from Elan’s core drug development and marketing business resurfaced in the form of a spin-out to create two separately-listed companies but was once again dropped because financing was scarce.
Elan will be a 25% shareholder in the new company, but plans to sell off its stake over time in order to retire its debt and reduce its hefty interest expenses by a third. Following the sell-off of EDT the drugmaker is expecting to post sales growth of around 15% a year for the next 3-5 years, according to chief executive Kelly Martin.
EDT specialises in applying novel formulation technologies to improve the profile of drugs, particularly those that are poorly-soluble in water. Its technologies have already been applied to a number of products, including Janssen’s Invega Sustenna (paliperidone) for schizophrenia and Acorda Therapeutics’ Ampyra (dalfampridine) for multiple sclerosis.
The Irish company also generates revenues from contract manufacturing some of the products developed using its formulation technologies. Last year it had revenues of $261 million from a combination of royalties, service revenues and milestone payments.
In turn, Alkermes has revenues of around $190 million a year, consisting mainly of contract manufacturing and royalty revenues for products which use its drug delivery technologies, notably Janssen’s antipsychotic Risperdal Consta (risperidone).
Alkermes also has direct product sales revenue from alcohol dependency treatment Vivitrol (naltrexone), and developing a portfolio of in-house medicines is very much a focus of the new company.
“The combined financial strength of the two companies gives resources to invest in an innovative pipeline of proprietary drugs,” said Martin.
Phil Taylor
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