Ireland’s Elan Corp. has received first-round bids for its drug delivery unit and is hoping for a quick sale of the business, which may fetch as much as $1.3-1.4 billion, according to people familiar with the matter.
The move to spin off Elan Drug Technologies (EDT), which develops new formulations of medicines on a contract basis for other drugmakers, will leave Elan focused on its own biotech drugs.
The split has been discussed for some time but has gained importance in the past fortnight following renewed safety concerns over multiple sclerosis drug Tysabri and disappointment with tests of an experimental Alzheimer’s therapy.
Shares in Elan have slumped two-thirds on the twin setbacks.
“They are planning a very quick process,” said one source, adding the operation was likely to go to a private equity buyer.
First-round offers were submitted at the end of last week and Goldman Sachs, which is leading the auction process, is expected to short-list those going through to the next round as early as Tuesday, sources said.
Elan Chief Executive Kelly Martin told Reuters on July 30 that Ireland’s biggest drug company was pushing ahead with a strategic review of EDT and had received a lot of interest from potential private equity buyers.
At the time, Martin said a stock market flotation was also being pursued as an option — but the group is now focusing primarily on a sale.
The success of Elan, which recovered from a brush with bankruptcy in 2002, has been linked closely to Tysabri and its Alzheimer’s drug.
The recent loss of confidence in both products has therefore been a body blow for the company, and a successful sale of EDT could help underpin the share price.
EDT lists 10 out of the world’s top 12 drugmakers among its clients, including Merck & Co, Wyeth and Abbott Laboratories.
It specialises in producing controlled-release as well as more soluble versions of pharmaceuticals, using smart technology such as nano crystals.
Despite the credit crunch, healthcare has continued to see a number of deals getting done, reflecting the sector’s steady cash flows and relative immunity to economic downturns.
Bristol-Myers Squibb in May agreed to sell its ConvaTec wound management business to private equity buyers for $4.1 billion, while Johnson & Johnson clinched a deal to sell its similar Ethicon unit last month.
(By Ben Hirschler and Megan Davies. Additional reporting by Mathieu Robbins in London and Jonathan Saul in Dublin; Editing by Louise Ireland)