) recently announced its decision to split into two separate
publicly traded companies. The spin-off, approved by its Board of
Directors, is expected to be completed by year end. The closure of
the transaction is dependent on many conditions, including approval
by the stockholders and the holders of the 2016 notes. The closure
of the spin-off will see Elan incurring a charge.
Management stated that the move to create two unique companies
is aimed at providing stockholders with more clarity apart from
widening their choices regarding long-term decision making.
While one company will focus on drug discovery, the other, which
will retain the company name, will have Tysabri (co-marketed with
Biogen Idec Inc.
)), ELND005 (phase II) and Elan's interest in
Johnson & Johnson
) Janssen Alzheimer Immunotherapy. The company which will focus on
drug discovery will be named Neotope Biosciences.
The company, which will function under the name Elan
Corporation, is expected to be profitable, generating significant
growth, immediately following the spin-off. This company is
expected to generate earnings of $1.00 per share by 2015 and will
focus on broadening Tysabri's reach, apart from facilitating
Elan Corporation, apart from providing the initial capital of
$120-$130 million to Neotope Biosciences, will retain a 14-18%
minority equity interest in Neotope. Neotope Biosciences intends to
file three investigational new drug (IND) applications by 2015.
We remind investors that in September 2011, Elan had sold its
drug delivery unit - Elan Drug Technologies - to
) for approximately $1 billion. The merged entity, headquartered in
Dublin, Ireland, is known as Alkermes plc.
Per the agreement, Elan received $500 million in cash apart from
31.9 million of Alkermes' ordinary shares. Elan received a 25%
stake in the combined company.
In March 2012, Elan sold 24.15 million shares, or 76% of its
stake in Alkermes. Excluding underwriting fees, Elan recorded net
proceeds of approximately $381 million from this transaction. Elan
retained the remaining 7.75 million Alkermes shares due to certain
legal and contractual transfer restrictions.
We currently have an Underperform recommendation on Elan. The
stock carries a Zacks #5 Rank (Strong Sell rating) in the short
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