Elan slashes debts with sell-off of drug-tech unit for nearly $1bn
IRISH drug firm Elan will slash its debt pile by $500m (€347m) after announcing the sale yesterday of its Athlone-based drug technology unit for almost $1bn (€694m), bringing to an end a three-year on-off divestment plan.
Elan said yesterday that it had agreed to sell its EDT drug technologies unit to US-based Alkermes for $960m.
Elan will retain a 25pc stake in a new company, Alkermes plc, which will represent the combined business of Alkermes and EDT. Its shares will be floated on the Nasdaq in coming weeks. Elan will also trouser $500m in cash.
Speaking to the Irish Independent yesterday, Elan chief executive Kelly Martin confirmed that all the cash proceeds will be used to pay down the company's existing $800m (€561m) in net debt, substantially de-leveraging the company's balance sheet.
He added that the existing 450 jobs at the EDT division in Athlone were safe and that Elan was also likely to make a further investment commitment to Ireland in coming months.
Mr Martin said that talks between Elan and Alkermes had been initiated about five months ago, and noted that management on both sides had hit on the "right time and right price".
He said the reduction in debt would also leave the company positioned to participate in future events.
It is likely to have to inject cash next year into Johnson & Johnson subsidiary Janssen AI, in which Elan has almost a 50pc stake, to fund an ongoing Alzheimer's Disease treatment development programme. J&J owns just over 18pc of Elan.
Analysts welcomed the deal, with Jack Gorman at Davy Stockbrokers saying it "made sense".
Elan's chief financial officer Shane Cooke, who was also the head of the EDT business, will become president of Alkermes plc, where Richard Pops, the current CEO of Alkermes, will become chairman and CEO. Elan's current group controller, Nigel Clerkin, will become its CFO.
The $960m EDT price tag is in line with a mooted valuation placed on the business last year by analysts when Elan announced plans then to explore a flotation of the arm, which manufactures treatments for drug companies such as Novartis, Pfizer and Sanofi-Aventis and has also developed drug delivery technology.
That flotation plan was later shelved, however. Elan had also sought buyers for the EDT unit in 2008, with private equity firms understood to have been among the interested buyers.
However, a sharp deterioration in markets amid the credit crunch prompted Elan to cancel the sale process.
Mr Martin said the sale of the EDT division, which posted a 14pc decline in revenue in the last quarter to $66m, will enable Elan to focus on the science end of its business. The company co-owns the rights to multiple sclerosis treatment Tysabri, which is on target to generate revenue of approximately $1bn for Elan this year.
Elan shares were up over 3pc at midday in New York.