ELAN Corporation has established a new company to undertake part of its research and development programme on a contract basis, funded by a $90 million (£56 million) share issue. The new company, Axogen, will have a public share offering and its stock will be traded on the New York Stock Exchange. Elan says the move will "fast track"its research programme.
Elan will have no shares in Axogen but will have an option to acquire the company in five years time.
Elan, which is based in Athlone, has also announced results which show a rise in profit before tax from $20.6 million to $28.7 million in the three months to September 30th, 1996. However, it incurred a net loss of $456.4 million following a write off of $484.8 million from the acquisition of Athena Neurosciences.
Axogen was formed to develop therapeutic products for the treatment of neurological disorders. Its primary focus will be on multiple sclerosis, but it also expects to develop products for other neurological diseases and disorders.
Setting up the company separately from Elan would "fast track development" said Mr Brian Crotty, Elan's vice president - investor relations. Elan is, in effect, contracting-out some of its research and development programme.
The market responded positively to the news, with bids for Elan shares at $26, from the last traded price of $24 1/8.
The public offering will be made through Merill Lynch & Co and each unit will consist of one American depositary share in Axogen and one five-year warrant to acquire an Elan American depositary share. Details of the offering will be disclosed in about a week's time.
Mr Crotty said if Elan decided to acquire the American depositary shares in Axogen (at "escalating predetermined prices") and if the warrants were exercised, Axogen shareholders would end up with a shareholding in Elan of not more than 5 per cent.
All the proceeds from the offering will be used to undertake clinical testing, final product development and the sale of the products under a development contract with Elan and its wholly owned subsidiary, Athena Neurosciences. Elan and Axogen will each have certain licensing, manufacturing and marketing rights to the products.
Elan has noted that a registration statement relating to the securities - the depositary shares and warrants - has been filed with the US Securities and Exchange Commission. However, this has not yet become effective.
Mr Crotty described the group's latest results as satisfactory. They also reflect the acquisition of Athena.
Shareholders' funds increased from $495.1 million to $609.4 million. Earnings per share were unchanged at 29 cents.
The once-off charge which put the group into the red largely Presents the value of the acquired in-process research in Athena. The charge also included a provision of $30 million for the integration, rationalisation and repositioning of certain Elan businesses, including the disposal of non strategic interests.
The acquisition of Therapeutic Systems, announced in September, will be completed today. This will be reflected in the next quarter results which will have a once-off charge of $142 million.
Elan's revenue rose by 70 per cent to $83.3 million in the quarter to September 30th, 1996. If the contribution from Athena is excluded, underlying growth amounts to 36 per cent. A breakdown of sales shows product sales up from $21.2 million to $37.6 million, an increase in sales from research from $ 10 million to $18.2 million and royalties up from $17.8 million to $27.5 million.
The growth in royalty revenue reflected the inclusion of Naprelan royalties together with growth in both Cardizem CD and Verelan royalties, partly offset by a decline in Cardizem SR.
Elan's president and chief executive officer, Mr Donal Geaney, noted that there had been exciting progress in its research programme "where prototype compounds that reduce the protein which forms the plaques found in the brains of Alzheimer patients, were shown to be orally active in Athena's model of Alzheimer's disease"
