Elan Corp. plc has initiated an offering targeted to gross from$45 million to $78 million by Aug. 11 to finance a new spin offdesigned to accelerate development of therapeutics based onnovel drug-delivery technologies.

Elan, a drug-delivery company based in Athlone, Ireland, spunoff Advanced Therapeutic Systems Ltd. (ATS) in May. The spinoff will become operational if the offering raises at least $45million, Brian Crotty, Elan's vice president of communications,told BioWorld. Crotty explained that ATS needs a minimumamount of financing to go into operation.

Rights for Elan shareholders began trading on the AmericanStock Exchange on Thursday and will expire Aug. 12, a dayafter trading closes.

Eight rights and $20 provide one unit consisting of one commonshare of ATS and one five-year warrant to acquire one commonshare of Elan (ASE:ELN), which primarily trades as AmericanDepositary Shares (ADS).

Elan and ATS are offering a total of about 3.9 million units. Ifless than $45 million is raised, the offering will be withdrawnand payments refunded.

In addition to the money raised in the offering, Elan willcontribute $35 million in cash to ATS before the offering isconsummated.

Elan will perform development work on contract to ATS, whichwill use all proceeds from the offering to develop productsbased on Elan's proprietary drug-delivery technologies.

The technologies are Electro Transport Drug AdministrationSystem (ETDAS), Biodegradable Enhanced Oral DrugAdministration System (BEODAS) and Microparticle InjectableDrug Administration System (MIDAS).

Elan and ATS expect that substantially all the funds raised inthe subscription offering will be paid to Elan under thedevelopment contract.

Elan and ATS will each have certain licensing, manufacturingand marketing rights relating to the products to be developedunder the development contract. In addition, Elan will have theoption to acquire all, but not less than all, of ATS's shares atescalating, predetermined prices per share through Dec. 31,1997.

The units will trade together for two years, then individually.The warrants will be exercisable for three years following theseparation of the units.

A 1991 Mehta & Isaly report on Elan noted that the company'sDrug Research Corp., founded in a similar offering in 1990,allows the parent company to reacquire the spin off if theproducts in development become profitable, offsetting a one-time charge to earnings with product revenues.

Otherwise, the company can decline to exercise its option topurchase shares and preserve net income without having hadto account for funding of the development program on its ownbalance sheet.

Elan's ADRs closed at $31 on Thursday, off 13 cents.

-- Nancy Garcia Associate Editor

(c) 1997 American Health Consultants. All rights reserved.