US PHARMACEUTICAL giant Johnson & Johnson (J&J) will take an 18.4 per cent stake in Irish biotech group Elan in return for a $1 billion investment. The deal, announced yesterday, will also see JJ acquire Elan’s assets and rights in an Alzheimer’s disease therapy programme being undertaken with Wyeth.

Johnson & Johnson will become the largest shareholder in Elan on conclusion of the deal.

It will also invest up to $500 million in the continued development of bapineuzumab, the lead Alzheimer’s disease therapy in the Elan/Wyeth collaboration, which is currently in phase III trials and, if successful, its subsequent commercial launch.

This money will be invested through a new company, a subsidiary of Johnson & Johnson, which will be set up specifically to manage the Elan share of the assets of the Elan/Wyeth Alzheimer’s Immunotherapy Programme (AIP).

Elan will hold a 49.9 per cent stake in the new company, will provide two directors to its seven-strong board and will receive that proportion of any profits from the AIP. It will also receive additional royalty payments if certain sales targets are met.

However, should the $500 million J&J investment in the Alzheimer’s programme be exhausted before a conclusion is reached, Elan will be expected to shoulder its portion of any additional funding requirements.

The announcement yesterday marks the conclusion of the strategic review of Elan announced back in January. The review undertook to explore ways in which Elan could improve the state of its balance sheet while finding ways of accessing the sort of global commercial infrastructure that would be necessary to roll out a successful Alzheimer’s therapy.

Elan chief executive Kelly Martin said yesterday that more than 30 companies had approached Elan for talks.

“This transaction addresses our financial needs and enables and possibly accelerates the advancement of the Alzheimer’s Immunotherapy Programme,” he said.

Chief financial officer Shane Cooke said J&J was paying $9.32 a share for its stake in the company, a 33 per cent premium to the $7 at which the shares traded in New York at the close of business on Wednesday. J&J has agreed to acquire no further stock in Elan for five years.

Shares in Elan jumped 19 per cent to $7.93 last night on the back of the news.

Mr Cooke said the deal will see Elan’s net debt drop from about $1.4 billion to about $400 million. The company will also receive the benefit of not having to fund RD in the AIP programme for the next three or four years at a cost of up to $500 million.

While some of that money will be diverted to other pipeline products, Mr Cooke said that “a large part of it, we would expect to flow to the bottom line”.