Johnson & Johnson buys £610 million Elan stake

J&J sells Reminyl, which is in the same class of medicines as Pfizer Inc's best-selling Aricept treatment for Alzheimer's disease. But the drugs, which block an enzyme called acetylcholinesterase, only slightly improve cognition and for a very brief period.

Combined U.S. sales of all Alzheimer's drugs rose to $3.4 billion last year, according to market research firm IMS Health, but analysts believe revenue could explode if new medicines can appreciably slow damage to the brain and memory.

"J&J has a much better chance to make bapineuzumab successful than Elan because it has the resources to conduct trials and distribute it," said David Katz of asset manager Matrix Asset Advisors. "And from a patient perspective, to have J&J involved is a good thing."

But the bet on bapineuzumab is risky.

Some analysts have all but written the drug off after a mid-stage trial showed that while it helped some patients with a certain genetic profile, it raised the risk of potentially serious side effects in the brain.

For J&J, which sells an array of products ranging from Band-Aids to arthritis drug Remicade, the potential warrants the risk.

"The fact that this drug may have potential to delay disease progression, we believe is significant," said company spokesman Srikant Ramaswami.

Elan and Wyeth remain committed to the drug, which is Elan's most advanced product. But under the transaction with J&J, Elan will receive 25 percent of any profit instead of the 50 percent it would have received previously.

That is because J&J and Elan plan to form a new company, which will be 50.1 percent owned by J&J and 49.9 percent owned by Elan. J&J will contribute an initial $500 million to the venture. Elan will contribute its Alzheimer's immunotherapy program.

"Elan loses control of one of its babies but they have a stake in it once it gets to market so they will get their due returns for the work they have put in," said Ian Hunter, an analyst with Dublin-based Goodbody Stockbrokers.