Staff Writer

Johnson & Johnson plans to make a whopping $1.5 billion investment in Elan Corp. plc in exchange for a stake in Dublin-based Elan, in a deal that will transfer key Alzheimer's programs, including Phase III bapineuzumab, to the U.S. drugmaker.

J&J spokesman Srikant Ramaswami told BioWorld Today that the deal represented a significant opportunity to "build a sustainable leadership position in the Alzheimer's disease market." He said that bapineuzumab may have the potential to slow the progression of the disease, while current drugs, including J&J's own Razadyne, are aimed at treating symptoms.

The outlook for bapineuzumab, a monoclonal antibody, seemed bleak after the company released lackluster Phase II data last year.

But a few months ago, the outlook brightened for antibodies like bapineuzumab that target toxic amyloid plaques in the brain, thanks to encouraging data presented in early April at the American Academy of Neurology meeting.

That research by the Alzheimer's Disease Neuroimaging Initiative showed a strong correlation between beta-amyloid levels and cognitive decline, information that could improve the design of future trials and help identify patients with beta amyloid who are likely to have rapid cognitive decline, Cowen and Co. analyst Ian Sanderson told BioWorld Today.

It was that study, Sanderson said, that "led to a higher level of interest in drugs targeting beta-amyloid."

But Elan is still about two years away from having Phase III data for bapineuzumab, making J&J's investment a gamble in Sanderson's view. Although the drugmaker certainly has the cash to enter such a deal, "they have rolled the dice," he said.

J&J may be taking a big chance with bapineuzumab, but if the drug is proven to work, it could carve out a unique position in the Alzheimer's market. Other drugs that are being developed to prevent amyloid plaques, such as gamma secretase inhibitors or those designed to have a neuroprotective effect, are aimed at patients in early stages of the disease.

Bapineuzumab, on the other hand, may work to clear plaques in patients with later-stage Alzheimer's disease. So if all goes well with the studies and it is ultimately approved, the product could "have a role as an add-on" therapy, Sanderson said.

A new J&J subsidiary will be formed specifically for the transfer to J&J of Elan's Alzheimer's immunotherapy program, including bapineuzumab, as well as a Phase II-stage subcutaneous formulation and a vaccine for Alzheimer's disease (ACC-001).

Elan and J&J together will own about 50 percent of the new J&J affiliate, while its collaborator on the AIP program, Wyeth, will own the other 50 percent.

The fact that Wyeth is in the process of merging with Pfizer Inc., which has partnered with Medivation Inc. on Alzheimer's drug Dimebon, "didn't have anything to do with it," Elan spokeswoman Mary Stutts said, referring to the decision to partner with J&J.

She pointed out that Elan's strategic review process had started before Pfizer announced its plans to acquire Wyeth.

Under the terms, J&J agreed to make an initial commitment of up to $500 million, money that will support the continued development and launch activities of bapineuzumab as well as other compounds.

J&J will take a nearly 19 percent stake in Elan under the deal. The companies anticipate concluding the transaction in the second half of the year.

The big pharma firm was among 30 companies that had lined up to make Elan an offer in its search for strategic funding options.

There is a standstill provision under the deal, in which J&J cannot acquire any more of Elan shares for five years, Stutts said.

But Cowen's Sanderson said the deal could be a prelude to a future M&A agreement if bapineuzumab does well.

Elan still is responsible for its remaining programs, but whether it can fund the rest of its pipeline "depends on how Tysabri plays out," Sanderson said, referring to the multiple sclerosis drug that Elan co-markets with Biogen Idec Inc. Tysabri (natalizumab) has repeatedly been linked to cases of the brain infection progressive multifocal leukoencephalopathy, an issue that could be crippling for the company, he said.

Shares in Elan (NYSE:ELN) were up 60 cents, or 9 percent, closing at $7.60.

Published  July 6, 2009