Elan Proposes Sweeping Transformation

Elan (UNKNOWN: ELN.DL2  ) will soon look like a different firm, if its big plans are realized. In an ambitious attempt to "decisively transform and advance the company," it has announced a series of strategic acquisitions. The first is of privately held Austrian concern AOP Orphan Pharmaceuticals. Elan would purchase 100% of the company for an up-front price of 263.5 million euros ($338.2 million) in cash and stock.

Elan has also targeted Dubai-based specialty producer Newbridge Pharmaceuticals, another private firm. It has purchased 48% of Newbridge for $40 million, and has an option to buy the remainder for $244 million by 2015.

In addition, Elan would like to create a new entity, Speranza Therapeutics, to focus on the development of its ELND005 (Scyllo-inositol), a treatment that addresses aspects of Alzheimer's disease and Down Syndrome. Elan would contribute $70 million in return for an 18% stake. A majority block of 62% would be held by a "third party equity financial partner" contributing $20 million, while the remaining shares would be held by Speranza management. Elan maintains that this arrangement would allow it to "eliminate the operating activities associated with the development of the drug... while at the same time maintaining a share of the potential upside."

The company plans to help finance these moves through an $800 million debt offering.

The acquisitions are subject to shareholder approval. An extraordinary general meeting will take place on June 17 to vote on them.


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