Equity giant pulls out of running for EDT buyout
KKR withdraws but Cinven, Bain Capital and TPG still interested in division
Elan chief executive officer Kelly Martin: stock has taken a battering today
Private equity giant Kohlberg Kravis Roberts (KKR) is understood to have pulled out of the running for Elan's €1bn drug delivery unit following an earlier move by equity firm Cinven.
Industry sources said yesterday that having participated in the early stages of the auction process, KKR has stepped away.
Cinven had earlier walked away from the table. It is believed that that Bain Capital and TPG Capital are still in the running. It was not clear yesterday whether Apax Partners is still looking at the division, Elan Drug Technologies (EDT).
Goldman Sachs and Lehman Brothers are advising Elan on the sale of the business. The focus on the auction comes after fresh concerns at Elan surrounding its leading drug and multiple sclerosis treatment, Tysabri.
Shares in Elan lost close to half their value at the beginning of the month after the treatment was linked to the potentially fatal brain disease progressive multifocal leukoencephalopathy (PML).
The link to PML came just days after the company announced mixed results for its Alzheimer's treatment AAB-001, which it is developing with Wyeth.
Perception
Yesterday, Merrion Stockbrokers said in a note that Elan is expected to give an update on the recent PML cases in Tysabri patients at the EFNS conference in Madrid next week.
It will be first official update on the patients' condition since the announcement of the new cases on July 31.
"Recovery or otherwise of the patients, and the success of the plasma exchange as a treatment for PML, is likely to have a material impact on physician and patient perception of the safety risk posed by the disease and accordingly on the future potential for the drug," analyst Sam Farthing wrote in a note.
Tysabri was voluntarily taken off the market in 2005 because of three cases of PML. It was later returned with stricter prescription guidelines.
Shares in the company finished down 3.3pc yesterday at €8.82. When Elan first announced its strategic review of the EDT business, a stock market flotation was an option although since then the company settled on a sale.
Analysts have said that as a more streamlined, pure biotechnology player, Elan could be more attractive for investors.
Merrion added: "We note that under Elan's debt covenants, Elan would be required to spend the proceeds of a sale on asset purchases or capex within 12 months or else to repay debt (at face value)."
- Ailish O'Hora Business News Editor
