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Elan Outlines Spending Plan

02/22/2013 | 11:16am US/Eastern

Irish drug maker Elan Corp. (>> Elan Corporation, plc) Friday said it would return $1 billion to shareholders, refinance debt and make acquisitions following the recent $3.25 billion sale of its stake in multiple sclerosis drug Tysabri to partner Biogen Idec Inc. (>> Biogen Idec Inc.).

Larger U.S. peer Biogen Idec agreed two weeks ago to acquire the 50% of Tysabri it didn't own from Elan, leaving questions over the future structure of the Irish company. Tysabri was Elan's largest drug, accounting for most of its revenue.

Elan, based in Ireland but with significant operations in the U.S., said at the time of the Tysabri transaction it would receive a royalty of 12% of Tysabri's global net sales for the first 12 months after the deal is completed.

"By unlocking a portion of the Tysabri asset value while retaining a significant earnings upside, we have a unique opportunity to reward shareholders, diversify our business and create a highly distinctive business platform upon which to advance to the benefit of shareholders and patients around the world," Elan Chief Executive Kelly Martin said.

The company plans to provide further detail on its acquisition and refinancing plans after the expected closure of the Tysabri deal after the second quarter, an Elan spokesman said. Mr. Martin wasn't available for further comment. Elan has traditionally focused on therapies for the central nervous system.

The company had around $600 million in long-term debt by the end of December 2012.

Deutsche Bank said that though the share buyback was welcome, significant questions remain over the structure of Elan in the future.

"Close to 40% of Elan's current market cap could be invested in as-yet unknown assets and as such, we are unlikely to gain the visibility needed to become constructive on the shares until transactions are concluded," analyst Richard Parkes said in a note.

Biogen, through the Tysabri acquisition, is betting that regulators will approve expanded use of the drug and help to bolster the company's already strong position in the lucrative MS market.

Although Tysabri is considered an effective and promising drug, the partnership between Biogen and Elan on its marketing has had a difficult history. Biogen suspended Tysabri in the U.S. in 2005 after two patients using combination therapy contracted a rare brain infection. Tysabri was approved in the U.S. and EU primarily as a single-use drug a year later.

Elan shares climbed following the announcement Friday.

Write to Jessica Hodgson at jessica.hodgson@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : Elan Corporation, plc, Biogen Idec Inc.
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