U.S. drugmaker Alkermes Inc. will merge with the drug-delivery division of Elan Corp. and move its headquarters from Massachusetts to Ireland, the two companies announced Monday in a deal worth $960 million.
They both said the deal, which has been in the works for at least half a year, would not mean any job losses on either side of the Atlantic.
For Elan, the sell-off of its drug technologies division caps nearly a decade of restructuring moves by the Dublin-based company to cope with crippling debts.
Alkermes said it expects to see its sales volumes double as an enlarged company and its tax bills reduce in Ireland, where the corporate tax rate is 12.5 percent, nearly two-thirds lower than those prevailing in the United States.
The two companies said Elan would receive $500 million in cash and a 25 percent stake in the newly incorporated Dublin-based Alkermes PLC, which will be worth approximately $460 million.
The deal requires regulatory and shareholder approval in both the United States and Ireland. The two companies said they hoped to clear those hurdles by the end of September, or the end of the year at the latest.
Alkermes said it would fund the acquisition with up to $450 million in borrowings from Morgan Stanley and HSBC. It and Elan stressed that the deal would not threaten any jobs either in Ireland or in Alkermes' current headquarters in Waltham, Massachusetts. They said the enlarged company was likely to hire more staff and expand operations.
Alkermes is a drug-delivery specialist that also produces five drugs for treatment of bipolar disorder, schizophrenia, diabetes, and alcohol and drug addiction.
Its acquisition of Elan Drug Technologies means it now can exploit Elan innovations for helping complex drugs to be absorbed effectively by the body. EDT's NanoCrystal technology aids drug compounds that dissolve poorly in water, while other technologies enable the gradual release of drugs from pills taken orally.
Elan chief executive Kelly Martin said the cash infusion would save Elan $130 million in annual interest on debts and give the company firepower to invest in research into clinical trials of potential treatments for Alzheimer's, Parkinson's and other neurological diseases.
"Elan has been restructuring and seeking to improve our capital position for a long time," Martin said in an interview with AP. "We've had 5 to 6 months of discussions with Alkermes and very fortunately experienced no leaks or rumors about it. The deal is truly positive for both sides, and it's rare to have that occur."
Martin said the deal would cut Elan's 2012 debts to around $700 million and boost its available cash and investments to $1 billion - the first time in more than a decade that Elan would not record a net debt.
The sell-off of Elan Drug Technologies leaves Elan as exclusively a company committed to developing drugs for neurological disorders. Its key drug is Tysabri, used to combat the paralyzing effects of multiple sclerosis.
Martin said he expected sales of Tysabri to keep growing around 20 percent annually, even though it can be prescribed only on a restricted basis because of its link to a rare, potentially fatal brain-inflammation disease called PML.
Elan's shares rose 3 percent to euro5.64 ($8.07) on the Irish Stock Exchange. Trading had yet to open on the Nasdaq-listed Alkermes.
Alkermes' chairman and chief executive, Richard Pops, will serve the same roles at Dublin-based Alkermes PLC. Elan chief financial officer Shane Cooke, who is head of Elan Drug Technologies, will step down as CFO and become Alkermes' president.
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