Elan may spin off contract manufacturing arm

However, the company insists it has made no firm commitment to such a move, while conceding that the unit could benefit from "more focus​", said CEO Kelly Martin. The spin-off - possibly a precursor to an outright sale of the business - would separate the outsourcing and technology arm of Elan from its drug development unit, which has seen its fortunes transformed in recent months by the recovery of its multiple sclerosis drug Tysabri (natalizumab). Tysabri was withdrawn from the market three months after its approval in 2004 after reports of three trial volunteers developing progressive multifocal leukoencephalopathy (PML), a progressive and frequently fatal condition. But the drug was reintroduced to the market in 2006, and has since ramped up rapidly to achieve sales of $232m in 2007, almost a third of Elan's total revenue. The company's expectation is that, buoyed by a new indication in Crohn's disease, the product will help take Elan's sales towards the $1bn threshold in 2008 and make it a profitable concern by 2010. That resurgence in fortunes appears to have prompted Elan's management to take another look at the structure of the company, and see if it would benefit from separating out EDT, which relies on manufacturing revenues and royalties, rather than product sales. Around $270m of 2007's total revenues of $730m came from EDT, up a healthy 16 per cent over 2006. EDT focuses on contract product development using an array of formulation and drug optimisation technologies, as well as scale-up and manufacturing services. It's main technology platform is NanoCrystal, used to help the delivery of compounds that are poorly-soluble in water. This has already been applied to a number of commercialised products, including Wyeth's immune suppressant Rapamune (sirolimus), Merck & Co's chemotherapy-associated nausea treatment Emend (aprepitant) and Abbott Laboratories Tricor (fenofibrate) for lowering cholesterol. Despite the positive sales trend for Tysabri, Elan could also benefit from a cash injection from the sale of EDT as costs start to ramp up related to its developmental programmes, and particularly a portfolio of new agents for Alzheimer's disease partnered with Wyeth. Abraxis court case imminent ​ However, there is a cloud hanging over EDT at present as a patent dispute surrounding the NanoCrystal technology is due to go to court in the US this week. Elan filed suit in 2006 against Abraxis for infringing on two patents on nanoparticle formulations of anticancer drugs with Abraxane (paclitaxel), the first nanoparticle drug to be approved by the US Food and Drug Administration (FDA). Abraxis denies the allegations and filed a counterclaim against Elan, challenging the validity of their patents and requesting a jury trial. If the outcomes goes against Elan it could have an impact on EDT and the value of its intellectual property estate. However, "we think we have a very substantial case on our side​," said Martin.