Elan's Alternative to Strategic Alternatives

Elan (NYSE: ELN) has decided to do nothing with its Elan Drug Technologies (EDT) unit. Again.

Back in 2008, the company put EDT, which helps drugmakers develop extended-release drugs, up for sale. But apparently no one was willing to pay what Elan thought it was worth. The credit crunch certainly didn't help.

Then earlier this year, the company decided to explore the idea of spinning off EDT into its own publicly listed company. After finishing the review, the company decided it was a good idea. Just not right now.

Considering the current market conditions for new IPOs, waiting seems like a good idea. After being shut for so long, the biotech IPO window opened, but seems to have given investors a bit of a chill. Last week, Trius Therapeutics slashed its IPO price to $5 from the initial $12 to $14 it was hoping for and NuPathe (Nasdaq: PATH) cut its $14 to $16 expected range down to just $10 per share.

For now, Elan is content collecting the royalty checks on sales of drugs that EDT helped develop, such as Johnson & Johnson's (NYSE: JNJ) Invega Sustenna and Acorda Therapeutics' (Nasdaq: ACOR) Ampyra.

It looks like Elan can afford to wait out the market downturn. The company is in a much better financial place after its deal with Johnson & Johnson to license half its half of Alzheimer's drug bapineuzumab (Pfizer (NYSE: PFE) owns the other half). The company was able to retire some near-term debt and thinks it'll be able to refinance additional debt soon. The decreased interest payments and increasing sales of multiple sclerosis drug Tysabri, which it sells with Biogen Idec (Nasdaq: BIIB), should help the company be cash flow positive next year.

At some point investors will likely get a chance to own EDT separately, but for now, if you want a piece of the drug technology business, you'll have to be willing to own the neurology side, too.