Elan sounds like it may indeed be for sale. Pretty hard to raise $500 million on a bunch of early stage collaborations, no? (see prior post). This is from Irish stockbroker Goodbody this am. Other Irish brokers out with similar statements. My bet would be on Wyeth, maybe something less than a total buyout, but who knows?
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Elan, this morning, announced that it has engaged Citigroup to conduct “a review of the
Company’s strategic alternatives”. The goal is to secure enough financial resources and
commercial infrastructure to allow Elan to develop and commercialise its pipeline and product
portfolio. Elan is looking to fund two 1000-patient Phase III trials of Bapineuzumab in the US and
develop manufacturing facilities in Ireland. It is noted that the strategic alternatives could include
minority investment, strategic alliances, a merger or sale. We continue to hold that even given a
reduced potential for Bapineuzumab and that Tysabri follows a slower ramp up in revenue, given
the threat of PML, the company is worth $13.75 per share. We believe that the current share
price reflects the overhang created by $1.1bn of debt due in late 2011. It is not the debt itself,
which is incorporated into our $13.75 valuation, but the ability of the company in the current
financial markets to service the debt, that is causing caution in the stock. The alternatives are,
refinancing, sale of assets (e.g. EDT and early-stage drug candidates) and/or issue of equity.
None would seem probable in today’s market conditions, but windows could open in the period
between now and November 2011. Any take out would be messy given Elan’s 50:50 JVs with
Biogen Idec and Wyeth on Tysabri and Bapineuzumab, respectively. However, the
announcement may imply merger/sale to one partner with the approval of the other. Larger, nonrelated
companies, would face a more complicated negotiation process with Biogen Idec and
Wyeth, who have change of ownership clauses allowing them to buy out the drugs, which
together make up the bulk of Elan’s value.
Bapineuzumab trials still 18 months. Separately, Elan has clarified that an article on
Bloomberg noting that clinical trials of Bapineuzumab may take longer to complete is erroneous.
The protocols for all four Phase III trials are designed to be 18 months duration. This timing has
not changed since the programme was first announced in December 2007. |
