Elan Separates R&D Unit

After three years of makeovers and the recent failure of its Alzheimer’s disease treatment bapineuzumab, the Irish pharmaceutical company Elan plans to spin off its drug discovery operations into a stand-alone company. Neotope Biosciences will work on inventing drugs to treat chronic neurodegenerative diseases such as Alzheimer’s and Parkinson’s. If the move is approved by shareholders, Elan expects Neotope to start trading on a U.S. stock exchange by the end of the year.

Elan will give Neotope $120 million to $130 million in start-up funds and keep a 14–18% stake. The new firm will have about 80 employees and be led by Dale Schenk, formerly the chief scientific officer of Elan. Neotope will work on drugs targeting amyloid and the proteins synuclein and tau. Elan expects Neotope to spend between $50 million and $60 million per year, with the goal of putting three drugs into human trials by 2015.

Meanwhile, Elan’s remaining 90 to 110 employees will focus on cultivating three assets: the multiple sclerosis treatment Tysabri, approved in 2004 and marketed with Biogen Idec; ELND005, a small-molecule drug in development for neurological conditions; and three Alzheimer’s disease treatments being developed with Pfizer and Johnson & Johnson.

The spin-off of its discovery unit is the latest in a string of restructurings that began in 2009 for cash-strapped Elan. That year, the company brought in $885 million by selling an 18.4% stake in itself to J&J that included its share of an Alzheimer’s collaboration with Pfizer. In May 2011, Elan sold its drug formulation business to Alkermes for roughly $960 million.

Stock analysts are positive on the latest move because it will immediately establish profitability for Elan, which has operated in the red despite healthy sales of Tysabri. “We believe this is a smart move because it unlocks more value” by decoupling the profitable Tysabri business from the risky and costly drug discovery business, RBC Capital Markets analyst Michael Yee said in a note to investors.

Elan says the move was in the works long before the recent news that Pfizer and J&J are ending development of bapineuzumab after it failed in two Phase III clinical trials (C&EN, Aug. 13, page 8).