THE Athlone based pharmaceutical development group, Elan, has made the biggest expansion in its history with the acquisition of the US drug firm Athena Neurosciences for $638 million (£406 million).
While the link up between Elan and Athena has been described as a merger, it is in reality a takeover as Athena shareholders will have just over 20 per cent of Elan shares when the deal is completed. Elan is issuing 9.74 million of its own shares to Athena shareholders on the basis of 0.2956 Elan shares for each Athena share.
The share swap offer values Athena shares at $18.25, a 22 per cent premium on the $15.12 at which the shares closed in New York last Friday. Athena climbed $2.13 to $17.25 in early trading on the Nasdaq market, still below the value of the Elan all share offer. At $18.25, the 35 million Athena shares in issue are worth $638 million.
The market responded positively to the takeover, and Elan shares fell $1.25 to $60.50 in low turnover a creditable performance given that Elan has said that the takeover will dilute earnings in 1996 before contributing to earnings from 1997 onwards.
Elan chief executive Mr Donal Geaney said Athena will dilute earnings per share by 10-15 per cent in the final six months of the nine month financial year ending next December. In 1997, however, Athena will begin contributing to Elan's bottom line with an expected single figure percentage gain in earnings per share followed by double digit earnings per share growth in 1998. Overall, earnings per share over the next three years will be higher than if Athena was not acquired. Elan has estimated net cash of over £120 million, but chief executive Mr Donal Geaney said the all share offer was the only one acceptable to Athena shareholders. "They didn't want cash," he said, adding that like Elan, most of Athena's shareholders are institutions and many of them are also shareholders in Elan.
"This merger advances our mind to market strategy by adding research, marketing, sales and distribution capabilities to Elan's expertise in drug delivery and development. With Athena's complementary skills, we will now be able to employ Athena's infrastructure to market products directly to providers," said Mr Geaney.
Athena was founded in 1986 and is a bio pharmaceutical company specialising in the development and marketing of pharmaceutical products for the treatment of neurological disorders, such as Alzheimer's disease, multiple sclerosis, Parkinson's disease and muscular dystrophy. The group has three existing products and has six products at the development stage.
In the year to the end of 1995, Athena had total revenue of $53.4 million and net losses of $29.8 million, mainly because of $39 million expenditure on research and development. "Companies like Athena are valued pre discoveries on the basis of their research and development," said Mr Geaney. He said that Athena is one of the leaders in R&D into Alzheimer's disease, and that Athena is also attractive because it has put in place a sales and marketing network to be ready for a market launch.
Mr Geaney said that Athena had not been actively seeking a buyer. "We became aware of Athena three years ago and a year ago we set up a number of collaborative agreements with them. Four or five weeks ago, we approached them again. With upcoming product launches from both companies, both of us felt it was a compelling time to get together." Mr Geaney said Elan would increase its access to neurologists in the US through Athena's marketing force of 42 specialists in pharmaceutical sales and 12 in diagnostic services. "As a result, Elan will be able to leverage Athena's market presence potentially to introduce its own products such as Neurelan, a new treatment for multiple sclerosis currently undergoing clinical trials." Both Elan and Athena have had recent success in getting regulatory clearance for products they have developed.
The takeover of Athena will also result in management changes at Elan, with Athena's president and chief executive officer, Mr John Groom, becoming Elan's chief operating officer. Mr Groom and Athena co founder, Dr Dennis Selkoe, will also join the Elan board. When the merger is complete, Elan will operate in three divisions reporting to Mr Groom Elan Technologies, Elan Pharma and Athena.
