Financial climate better for potential delivery unit sale, says Elan

By Gareth Macdonald

- Last updated on GMT

Related tags Copyright Élan

Financial climate better for potential delivery unit sale, says Elan
Irish pharmaceutical company Elan says most potential investors are positive about proposal to spin-off drug delivery unit.

The firm, which resurrected the idea of establishing Elan BioNeurology​ and EDT​ as separate entities in April​, told shareholders the financial climate and, hence the motivation, for the spin-off have changed significantly since it was first considered in 2008.

CFO Shane Cooke explained to Reuters ​that: “When we looked at this in 2008, it was more financially driven. We didn't have the financial resources that we now​,​” citing the sale of Elan's Alzheimer’s Immunotherapy Program (AIP).to Johnson & Johnson (J&J) last September as a key factor.

Cooke went on to explain that this time around, rather than being motivated by money, discussions are focused on the sale's likely strategic impact.

Following on from this idea Elan CEO Kelly Martin was upbeat about the current financial climate, explaining that preliminary discussions with potential investors in EDT were “almost universally positive​.”

The drug delivery unit’s performance in the first three months of 2010 must also be a factor in Elan’s optimism about finding a buyer this time around.

Drug delivery revenue for the quarter ended March 31 reached $76.4m (€61.5m), up 27 per cent on the comparable period in 2009, driven, according to Elan, by Acorda Therapeutics’ launch of Ampyra (dalfampridine) extended-release tablets.

Generic competition

However, potential buyers should also note Elan’s comments about the likely impact of increased generic competition on products made by its drug delivery business.

In its first quarter report, Elan said that: “Potential generic competitors have challenged the existing patent protection for several of the products from which it earns manufacturing revenue and royalties.

The firm went on to say that while, in partnership with clients, it will defend its intellectual property rights; if these challenges are successful “manufacturing revenue and royalties will be materially and adversely affected.

Elan cited Skelaxin (metaxalone), a drug used to treat muscle spasms, as a product for which it expects royalty revenues to decline this year due to non-branded competition.

Tysabri drives BioNeurology unit in Q1

Looking beyond the potential delivery unit sale, Elan’s BioNeurology unit, formerly known as Elan Biopharmaceuticals, had a good start to 2010, with revenue for the quarter growing 26 per cent to $234m.

The firm said that Tysabri (natalizumab), its multiple sclerosis treatment, was the key factoring the gains, explaining that global sales for the period “increased 25 per cent to $198m​.”

The contributions from both parts of its business helped Elan finish Q1 with operating profit of $32.7m, up from a $54m loss in 2009, and total revenue of $310m, which is an increase of 26.5 per cent on the year-earlier period.

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