A Medical Device Daily

Johnson & Johnson (J&J; New Brunswick, New Jersey) reported that it will acquire of the assets and rights of Elan (Dublin, Ireland) related to its Alzheimer's Immunotherapy Program (AIP Program), through a newly formed company. In addition, J&J, through its affiliate, will invest $1 billion in Elan in exchange for newly issued American Depositary Receipts (ADRs) of Elan which will represent 18.4% of Elan's outstanding ordinary shares.

The AIP Program represents Elan's interest in a collaboration with Wyeth (Madison, New Jersey) to research, develop and commercialize selective products for the treatment and/or prevention of neurodegenerative conditions, including Alzheimer's disease.

J&J will assume and continue Elan's activities with Wyeth under the AIP Program and will initially commit up to $500 million to continue the development and launch activities of bapineuzumab, a potential first-in-class treatment that is being evaluated for slowing the progression of Alzheimer's disease, as well as other compounds. The agreement provides for additional funding obligations of the parties if needed.

In consideration for the transfer of these rights and assets, Elan will receive a 49.9% equity interest in the newly formed J&J company that will acquire the AIP Program. Elan will be entitled to a 49.9% share of the profits and certain royalty payments upon the commercialization of products under the collaboration with Wyeth.

"Alzheimer's disease is a significant unmet need in aging populations globally," said Sheri McCoy, Worldwide Chairman, Pharmaceuticals, Johnson & Johnson. "Johnson & Johnson's development capabilities, commercial experience and global reach will provide the foundation to accelerate the AIP Program development, and increase its potential availability for patients globally."

The boards of both companies have approved the transaction, which represents the culmination of an in-depth strategic review by Elan. The transaction is conditioned on clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

Interleukin Genetics (Waltham, Massachusetts) reported that it executed an agreement to sell the Alan James Group assets of its subsidiary AJG Brands to Pep Products, a subsidiary of Nutraceutical (Park City, Utah), for about $4.6 million in cash. The transaction was completed following the close of business on June 30.

"The sale of AJG provides non-dilutive cash to continue development and promotion of our genetic testing services and products including our new brand of Inherent Health tests," said Lewis Bender, CEO, Interleukin Genetics.

Interleukin develops genetic tests, including its new brand of Inherent Health genetic test products that are designed to empower consumers to maintain health and wellness, and assists pharmaceutical companies in the development and marketing of targeted therapeutics.

In other dealmaking news:

• RehabCare Group (St. Louis) has entered a joint venture that will acquire certain assets of Gulf States LTAC formerly owned by Gulf States Health Services (both, Dallas) and a group of Dallas area physicians. RehabCare will own 80% of the interests and the physicians will own the remaining 20%.

RehabCare will manage the daily operations of the hospital and the approximately 190 staff members will become employees of the new joint venture.

• Kindred Healthcare (Louisville, Kentucky) reported that it has completed the previously reported acquisition of the real estate related to six under-performing nursing centers previously leased from Ventas (also Louisville) for $55.7 million. In addition, the company will pay a lease termination fee of $2.3 million. The annual rents for the Nursing Centers were nearly $6 million.

The Nursing Centers, which contain 777 licensed beds, generated pretax losses of nearly $3 million for the year ended Dec. 31, 2008 and nearly $2 million for the three months ended March 31, 2009.

The company expects to account for the operations of the Nursing Centers and the loss on these transactions as discontinued operations when it reports its operating results for the second quarter ended June 30, 2009.

The company intends to dispose of the Nursing Centers as soon as practicable. The company expects to generate about $15 million to $20 million in proceeds from the sale of the Nursing Centers and the related operations. The company expects to record a net loss of nearly $27 million to $31 million in the 2Q09 relating to these divestitures.