Elan Drug Tech to merge into Alkermes in $960 million deal to create CNS leader

US drugmaker Alkermes (Nasdaq: ALKS) and Ireland-based Elan Corp (NYSE: ELN) revealed this morning that they have executed a definitive agreement under which Alkermes will merge with Elan Drug Technologies (EDT), the drug formulation and manufacturing business unit of Elan, in a cash and stock transaction currently valued at around $960 million. Alkermes and EDT will be combined under a new holding company incorporated in Ireland, which will be named Alkermes plc.

Elan has previously tried to hive of its EDT business as far back as 2008 and, last year, reaffirmed that it would continue to look for a transaction to achieve this (The Pharma Letter April 20, 2010). In 2009, health care giant Johnson & Johnson paid $885 million to acquire an 18.4% stake in Elan and rights to much of the firm's research into drugs for Alzheimer's disease. Elan’s shares rose 1.2% to 5.53 euros at 8:29 am today in Dublin trading. The stock has gained 34% so far this year.

Under the deal, Elan will receive $500 million in cash and 31.9 million ordinary shares of Alkermes common stock. The transaction is expected to be immediately accretive to cash earnings to Alkermes and is to have annual royalty and manufacturing revenues in excess of $450 million and adjusted EBITDA of $80 million on a pro forma basis. On a pro forma basis revenues are expected to grow in fiscal year 2012 and reach double digit in FY2013 and beyond.