J&J takes on Alzheimer's disease with $1B stake in Elan
TRENTON, N.J. -- Johnson & Johnson, making a big jump into the risky but potentially lucrative field of Alzheimer's disease, is taking a major stake in Irish biopharmaceutical company Elan, investing up to $1.5 billion initially.
The two will cooperate to complete research on two injected drugs to stop progression of the mind-robbing disease and on a vaccine to prevent the buildup of plaque in the brain that causes increasing memory loss, confusion, wandering and aggression.
"It's good news for Alzheimer's patients and their families," said Erik Gordon, an analyst and professor at University of Michigan's Ross School of Business. "For J&J, it looks like a high-risk but reasonable bet."
J&J, the world's biggest health care company with nearly $64 billion in 2008 sales, can pour far more money than Elan into the research, he said. J&J sells one Alzheimer's drug, Razadyne, with sales of just $541 million last year, but company executives last month said Alzheimer's disease is now a priority.
Several drugs help limit memory loss and other symptoms, but there are no treatments to stop or reverse brain damage caused by the disease. The market is huge — roughly 5.3 million current U.S. Alzheimer's patients, and more than 100 million worldwide are expected eventually as the population ages.
Under the deal, Johnson & Johnson will take an 18.4% stake in Elan by spending $1 billion to buy 107.3 million newly issued American Depositary Receipts at $9.32 each, a 33% premium to Wednesday's $7 closing price.
J&J plans to commit up to $500 million initially for development of bapineuzumab, the compound furthest along in testing, with both companies providing more money if needed.
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