Elan Corporation, plc (NYSE: ELN) may be surging on news that it is going to spin off its drug research unit, but now there is something else to consider.  Elan could be getting closer and closer to becoming a ripe takeover target.  This Irish drug company notes that its work is in R&D and commercial activities for neurodegenerative diseases, such as Alzheimer’s disease and Parkinson’s disease and autoimmune diseases, including multiple sclerosis.

It was last year that Elan and Alkermes plc (NASDAQ: ALKS) completed its merger with Elan Drug Technologies, which was the drug formulation and manufacturing business unit of Elan. Elan also has ties with Biogen Idec Inc. (NASDAQ: BIIB) via TYSABRI as a key approved therapy for relapsing forms of multiple sclerosis.

Elan will now spin out its drug discovery operation and the unit will have about 80 employees and $130 million in cash.

It was FierceBiotech which listed Biogen Idec as a possible buyer.  We would note that this would not be the first time that such a deal has been speculated.  The two are tied together with TYSABRI and the drug keeps growing.  Elan noted recently with its earnings, “For the first half of 2012, Tysabri global in-market net sales increased by 8% to $794.5 million from $738.4 million for the first half of 2011, while units sold increased by 14%.” In the U.S. alone, there were approximately 31,900 patients on commercial therapy (TYSABRI) and that was up 4% versus the end of March 2012 and up 12% versus the end of June 2011. Net sales were down in the rest of the world, but units sold still increased.

Pfizer Inc. (NYSE: PFE) just said in July that top-line results in the first of four bapineuzumab Phase 3 studies carried out by Pfizer and Janssen Alzheimer Immunotherapy stated that the co-primary clinical endpoints were not met.  Elan shares have held up relatively well considering the news, and now the shares are back to where they were before the Pfizer disappointment.

As far as an Elan buyout is concerned, this is one that we will believe when we see it even if the analysis is solid.  This rumor (or chatter or hope) has been around for ages that Elan would be acquired.  That being said, Elan’s ADRs are trading up 5.5% at $11.72 on volume that is already 50% higher than a full day’s volume.  The 52-week range is $9.00 to $15.27.

JON C. OGG

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