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Johnson & Johnson to take stake in Elan

The firms will work jointly on Alzheimer's drugs and a vaccine.

July 03, 2009|Associated Press

TRENTON, N.J. — Johnson & Johnson, making a big jump into the risky but potentially lucrative field of Alzheimer's disease, is taking a major stake in Irish biopharmaceutical company Elan Corp., investing up to $1.5 billion initially.

The two companies will cooperate to complete research on two injected drugs aimed at stopping the progression of the mind-robbing disease and on a vaccine to prevent the buildup of plaque in the brain that causes increasing memory loss, confusion, wandering and aggression.

The deal, announced Thursday, sent Elan's U.S. shares up 66 cents, or 9.4%, to $7.66 in after-hours trading after closing up 60 cents at $7.60. J&J fell $1.09, or 1.9%, to $55.98.

The agreement could reinvigorate ailing Elan and save the jobs of top executives who face shareholders at the company's July 17 annual meeting. It would make J&J a major player in one of the biggest areas of unmet medical need and -- if further testing is successful -- bring the treatments to market faster.

"It's good news for Alzheimer's patients and their families," said Erik Gordon, an analyst and professor at University of Michigan's Ross School of Business. "For J&J, it looks like a high-risk but reasonable bet."

Johnson & Johnson of New Brunswick, N.J., sells one Alzheimer's drug, Razadyne, which had sales of just $541 million last year, but company executives last month said Alzheimer's disease is now a priority.

Several drugs help limit memory loss and other symptoms, but there are no treatments to stop or reverse brain damage caused by the disease. The market is huge: There are roughly 5.3 million current U.S. Alzheimer's patients, and more than 100 million worldwide expected eventually as the population ages.

Under the deal, Johnson & Johnson will take an 18.4% stake in Elan by spending $1 billion to buy 107.3 million newly issued U.S. shares at $9.32 each, a 33% premium to Wednesday's $7 closing price.

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