Elan shareholders agree to split company

Shareholders at Irish biotech Elan have overwhelmingly approved a move that will hive off the bulk of the company’s drug-discovery business into a new listed company.

At a sparsely attended extraordinary general meeting it was agreed to split the company in two. Elan will continue to own the rights to its blockbuster multiple sclerosis drug Tysabri and certain other late-stage drug development candidates. A new company, Prothena, will focus on early-stage drug development and research.

Elan shareholders will directly own 82 per cent of Prothena, which will be listed on Nasdaq. They will receive one share in Prothena for every 41 shares held in Elan. They will also control the remaining 18 per cent, which will be held by Elan.

Elan, which has put $99 million into the new company, will also pay $26 million for the 18 per cent shareholding.

In a letter to shareholders, Elan chairman Robert Ingram said it was expected this would provide Prothena with “sufficient liquidity and capital resources to meet its working capital needs through June 30th, 2015”.

He acknowledged that the new company’s early-stage research programmes would require “significant ongoing cash investment and currently generate substantial losses” but said the new company would attract investors interested in “the unique characteristics of that business”.

Elan said the move would result in a significant fall in costs, including on research and development for the rump company, which will continue to trade as Elan. By way of illustration, Mr Ingram said this would have meant a $180 million boost to Elan’s bottom line in the 2011 financial year.

At the meeting, Elan chief executive Kelly Martin said over 459 million proxies had been delivered to the company out of the 592 million shares in issue – 458.2 million were in favour of the proposal.