What's $115 Million Between Friends?

What is an option to buy half of Elan (NYSE: ELN  ) and Biogen Idec's (Nasdaq: BIIB  ) multiple sclerosis drug, Tysabri, for an undetermined amount of money worth?

Apparently, $115 million. That's one expensive call option, especially considering that there's a decent chance that it would have never been invoked.

Johnson & Johnson (NYSE: JNJ  ) got the option as part of its deal to buy half of Elan's Alzheimer's drug pipeline. Johnson & Johnson could only have invoked the option if there were a change of ownership at Biogen. In that case, Johnson & Johnson would have had the option to finance Elan's buyout of Biogen's half of their Tysabri partnership, thus making Elan and Johnson & Johnson partners.

No such luck. Biogen cried foul. A court agreed. And Elan had to fix the mess it had gotten itself into.

Johnson & Johnson either thought the option was very valuable, or it figured that Elan was between a rock and a hard place, and decided to squeeze a little more out of the desperate-for-cash biotech. The new terms of the deal remove the Tysabri option, but Johnson & Johnson is only paying $885 million for an 18.4% stake in the company, not the originally agreed-upon $1 billion. That works out to just $8.25 per share -- not much of a premium on yesterday's closing price, considering how much Elan had to give up.

As I wrote when the original deal was announced, the true benefits of this deal for Elan will be determined by the success or failure of its phase 3 Alzheimer's drug, bapineuzumab. Giving up half of its half of the drug -- Wyeth (NYSE: WYE  ) , soon to be Pfizer (NYSE: PFE  ) , owns the other half -- will look like a great move if bapineuzumab fails, and a stupid move if the drug becomes a multibillion-dollar blockbuster. The difference of $115 million won't change that, although it certainly would have been nice to have.