What is an option to buy half of Elan
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
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