Irish pharma company Elan has said it plans to spin off its drug discovery operations into a new stand-alone company in a drive for profitability.
Elan's discovery sciences unit would be combined with Neotope Biosciences, an affiliate of the parent company that focuses on the development of antibody-based therapeutics, to create an independent company focusing on "chronic degenerative and other related disease areas".
The announcement comes days after Elan and partners Pfizer and Johnson & Johnson were forced to concede defeat in their bid to develop intravenous Alzheimer's drug bapineuzumab after two failed phase III trials, although the company insists the plans have been on the table for some time.
Elan will be left with a business focusing mainly on Tysabri (natalizumab) for multiple sclerosis, partnered with Biogen, as well as pipeline drugs ELND005 for central nervous system disorders and its partnership with Pfizer/J&J on the Alzheimer's programme.
The Alzheimer's collaboration still has a subcutaneous formulation of bapineuzumab in trials, as well as a vaccine candidate (ACC-001) in phase II and a follow-up antibody (AAB-003) in phase I.
The drug discovery company will be incorporated in Ireland under the Neotope Biosciences banner and will be led by chairman Lars Ekman and chief executive Dale Schenk. It will benefit from around $120-$130m in start-up capital from Elan, which will retain a 14-18 per cent minority stake in the company.
News of the plan sparked immediate speculation that Elan is trying to make itself more attractive for a takeover by Biogen, but the company has remained tight-lipped on any eventuality that might emerge after the separation of the business units.
This is not the first time that Elan has hived off a non-core business. Last year, the pharma company sold its Elan Drug Technologies unit off to Alkermes in a $960m deal designed to reduce high levels of debt.
"This is a bold and logical strategic step as it provides shareholders with the ability to delineate risk, timelines and business characteristics to their own specific investment objective," said Elan chief executive Kelly Martin.
"By establishing Neotope Biosciences and Elan as distinct businesses … we provide investors with important clarity, transparency and choice as it relates to their investment decisions," he added.
The spin-off is subject to certain conditions, including approval by shareholders and holders of Elan's 2016 notes, and is expected to be completed by the end of this year.
Elan said the transaction would allow it to post operating profit of more than $400m in 2013, with net earnings of around $250m.