J&J Pays $1.5 Billion for Elan Stake, Takes Aim at Alzheimer's

J&J Pays $1.5 Billion for Elan Stake, Takes Aim at Alzheimer's

Johnson & Johnson on Thursday said it will buy an 18.4% stake in Irish biotech company Elan Corp., in a $1.5 billion bid to crack the elusive but potentially lucrative market for Alzheimer's disease treatments.

The agreement gives J&J access to bapineuzumab, a closely watched experimental Alzheimer's treatment that is in late-stage human studies but whose prospects remain uncertain.

There are few treatments for Alzheimer's, a degenerative brain disease that is poorly understood. Two late-stage trials of experimental treatments, Myriad Genetics Inc.'s Flurizan and Neurochem Inc.'s Alzhemed, have failed in the last two years.

The treatments on the market address the disease's symptoms but don't stop its progression. Analysts say the Alzheimer's market is currently worth more than $3 billion a year world-wide.

Among the treatments now on sale are Aricept, from Eisai Inc. and Pfizer Inc.; Namenda, from H. Lundbeck AS and Forest Laboratories Inc.; and J&J's Razadyne, which treats memory loss and other symptoms of mild to moderate Alzheimer's.

Drug-development efforts have been hampered by a lack of knowledge about Alzheimer's causes. Most research has focused on preventing or reducing a sticky substance called amyloid in patients' brains thought to be linked to the disease's progression. Another group of compounds in development target tau, a different protein thought to be culpable.

Despite the uncertainty, drug makers have been spending billions of dollars to develop new Alzheimer's compounds because the potential payoff is big.

In the U.S. alone, the National Institute on Aging says that as many as 4.5 million patients suffer from the illness, which gradually robs people of their memories. World-wide, 24 million people have Alzheimer's and other forms of dementia, according to the World Health Organization.

"If a drug like bapineuzumab can actually halt progression of Alzheimer's, this could be an extremely large market," with more than $25 billion in annual sales world-wide, said Linda Bannister, an Edward Jones analyst.

Bapineuzumab, which is one of the most advanced treatments in development, had mixed results in earlier trials and is considered a high-risk investment. The so-called therapeutic vaccine aims to fight the progression of Alzheimer's by using antibodies to remove amyloid.

"I have become more skeptical about bapineuzumab than I was, say, two years ago or three years ago, partly because we've learned a lot more about the dynamics, if you will, of amyloid in the brain," said P. Murali Doraiswamy, professor of biological psychiatry at Duke University Medical Center. He has been involved with clinical trials or served as a consultant for several companies working on Alzheimer's, including an ongoing affiliation with Elan.

Amyloid appears to turn over rapidly in the brain, so a treatment that clears it from the system might have only a temporary response, requiring additional or more frequent treatments, he said.

There also have been cases of brain swelling in some bapineuzumab-trial participants, prompting the companies to stop giving some patients in late-stage trials the highest of three dose levels of bapineuzumab.

J&J, of New Brunswick, N.J., initially will commit as much as $500 million to continue bapineuzumab's development. For an additional $1 billion, J&J will get the Elan stake and will transfer the rights to Elan's Alzheimer's program into a new company. Elan will get a 49.9% stake in the new company, with J&J owning the balance.

Dublin-based Elan and Wyeth, of Madison, N.J., have been developing several potential therapies to slow the progression of Alzheimer's, in a collaboration that Wyeth will continue with J&J and Elan. Wyeth, which is in the process of being acquired by New York-based Pfizer, will receive 50% of the profits resulting from the collaboration, with Elan receiving slightly less than a quarter and J&J slightly more.

Pfizer referred questions to Wyeth, which issued a statement calling the deal a validation of the collaboration's work. "We are looking forward to discussing this proposed transaction in detail with Elan and J&J, as we continue to focus on the development of bapineuzumab and other" experimental therapies, Wyeth added.

Analysts said they didn't expect Wyeth to challenge the deal because J&J's investment helps solidify Elan, which has needed cash to help fund clinical trials.

The proceeds will allow Elan to reduce its debt to $400 million from about $1.8 billion, Chief Financial Officer Shane Cooke said in a conference call with analysts.