ELAN Corporation has made its second biggest acquisition, with the purchase of the American group Sano Corporation for $375 million (£268 million). The acquisition of Sano gives Elan a substantially bigger presence in transdermal patch technology where dosage of pharmaceuticals are delivered through patches on the skin rather than orally.
Elan is buying Sano in an allshares deal, which will see it issue almost seven million shares to Sano shareholders, who will end up owning about 7 per cent of the enlarged Elan. The offer values Sano shares at $35.50 each, a premium of almost 48 per cent on Sano's price in the market last Friday of $24. The all-share nature of the acquisition was at the insistence of the Sano board.
Sano has no products in production or which have yet been approved for sale, and Elan is effectively buying Sano for its expected flow of products. "The price we have paid is based on a valuation of Sano's expected income stream going forward. We would normally expect to pay a between 30 per cent 50 per cent of a control premium for companies like this," said Elan chief executive Mr Donal Geaney.
Mr Geaney said that Sano has developed a sophisticated and clear transdermal patch. "We decided not to go beyond our own nicotine patch because our own system is older and more expensive to produce," he said.
Elan's own nicotine patch will be sold over-the-counter (OTC) in the US and Europe from next year, but it will probably be three to five years before Sano's mecamylamine nicotine patch qualifies for OTC. Sano's nicotine patch differs in that it makes it unpleasant for smokers to continue smoking, rather than simply substituting for the nicotine contained in tobacco.
Sano also has another product, buspirone, licensed to Bristol Myers Squibb. This product will be used for the treatment of anxiety and depression. Clinical trials on the buspirone products licensed to Bristol Myers Squibb are likely to be completed next year, but it will probably be 2000 before the products are actually on the market, said Mr Geaney.
Sano has 15 products - ranging from alcohol addiction treatment to female and male contraception at various stages of development. "We probably won't develop all of them, but they have plenty to keep us busy," said Mr Geaney.
While Elan said that the acquisition would be earnings-neutral next year despite a one-time charge for the write-off of Sano's in-process R&D, Elan shares were weaker in both Dublin and on the NASDAQ market. In Dublin, the shares fell 223p to £34.50, while on NASDAQ, the share was trading at $50 as the Irish market, a fall of $3.60 on Friday's closing level.
At the £34.50 close in Dublin, Elan has a market capitalisation of almost £3.7 billion.
