Elan drops EDT sale plans on market uncertainty
Elan’s Drug Technology (EDT) division, which conducts contract technology development on behalf of drug industry clients, was put up for sale in May as part of strategic reshaping efforts. At the time, company CEO Kelly Martin said that the unit would benefit from "more focus”.
The decision to withdraw EDT from sale was unveiled during an upbeat set of third quarter financials last week that saw Elan’s operating loss fall 38 per cent to $39.3m (€31.4m).
The revised plans follow months of media speculation and jockeying by investment groups such as Texas Pacific, Bain Capital and Warburg Pincus, which had all expressed an interest in buying the $1bn unit.
Commenting on the move, company CFO Shane Cook said that following “the recent dislocation and uncertainty in the financial credit markets, Elan has decided to retain the EDT for the foreseeable future and put in place structures to allow EDT to develop and grow as an independent wholly-owned subsidiary.”
For the third quarter, Elan’s EDT operations produced revenue of $71.2m, up around 3 per cent on the year earlier quarter. This contribution was dwarfed by the company’s biopharmaceuticals business which made turnover gains of 85 per cent to $198.9m for the period.
Much of the biopharmaceuticals gains were due to the multiple sclerosis drug Tysabri (natalizumab), which generated sales of $164.5m, up 159 per cent on the comparable period last year. Cook commented that the drug is fast approaching blockbuster status.
Tysabri’s future still unclear despite “blockbuster” claims
As previously stated, Elan’s reappraisal of the EDT sale follows a dramatic increase in its biopharmaceuticals revenue, particularly that generated by Tysabri.
The growth described by Cook represents something of a recovery for the drug after a problematic first few years on the market. Within months of its US approval in 2004, Tysabri was withdrawn after two patients using it developed the brain disorder progressive multifocal leukoencephalopathy (PML).
The drug was subsequently re-launched in 2006 having regained Food and Drug Administration approval, albeit with stricter set of monitoring and usage regulations. Shortly after, Tysabri was granted European marketing clearance.
Since then however, several new cases of PML have emerged causing some to again raise questions about the drug’s long term prospects. One such observer was Davy analyst Jack Gorman who linked Elan’s decision to abandon the EDT sale to uncertainty raised by the re-emergence of PML.
He said in an interview with the Irish Independent that: "It may be more prudent to keep cash-generating units like EDT until there is more clarity on the take-up of Tysabri, following the most recent PML cases.”
