US BASED drug technology companyAlkermes will purchase Elan’s drug formulation and manufacturing unit in a deal worth an estimated $960 million.

The cash and stock transaction will see Elan Drug Technologies and Alkermes merge under a new holding company, Alkermes plc, which will be incorporated in Ireland.

Under the deal, which has already been approved by the boards of Elan and Alkermes, Elan will receive $500 million in cash and 31.9 million ordinary shares of Alkermes plc common stock, equal to a 25 per cent shareholding in the new enterprise. At Friday’s Alkermes share price of $14.47, the shares are worth just over $460 million. Alkermes Inc shareholders will receive one ordinary share of Alkermes plc in exchange for each share held at the time of the merger.

Once combined, the firm is expected to have revenues of $450 million a year. That compares with forecast 12-month revenues of $180 million.

Alkermes chief executive Richard Pops visited Elan Drug Technologies’ Athlone base yesterday to meet staff and reassure them about their jobs.

Both sides said there was no intention to cut jobs as their products were complementary rather than overlapping. Mr Poll held out the prospect of additional recruitment in the future.

Elan chief executive Kelly Martin said yesterday the transaction would advance “aggressively” a number of strategic and financial objectives for Elan. “Namely, it enables us to reduce the debt on our balance sheet and further improve our capital structure, increases operating leverage, allows for additional focus and continued disciplined investment in a broad array of opportunities within the neurology space from a scientific, clinical and product point of view and lastly, provides Elan shareholders with the opportunity to realize further value – over time – from the equity position in Alkermes plc.”

Elan will be subject to a six-month lock-in period but is then expected to sell down its Alkermes shares over the following two years.

Up to 75 per cent of the value of the deal will go to pay down Elan’s $1.3 billion in debt, particularly the $460 million in bonds due to mature in 2013.

The new company, which will be listed on the US Nasdaq index, despite its Irish headquarters, is expected to show robust revenue growth, with five high-growth commercial products and complementary new drug development capabilities.

“The merger will be financially transformative and create a profitable, global biopharmaceutical company with a diversified central nervous system product portfolio and a strong foundation for growth,” said Mr Pops.

Mr Pops will become chairman and chief executive of the new company, while the current head of the Elan unit Shane Cook will be president. Mr Cooke has stepped down as chief financial officer of Elan as part of the transaction.

Alkermes is to finance the deal with a loan of up to $450 million from Morgan Stanley and HSBC Bank.