Elan Hits Biogen Idec with Lawsuit to Protect Tysabri Deal with J&J

Xconomy Boston — 

Relations appear to be increasingly strained between Biogen Idec (NASDAQ:BIIB) and the Irish drug company Elan, its partner for the distribution and development of the multiple sclerosis drug natalizumab (Tysabri). Elan said today that it has filed suit against Biogen over the Cambridge, MA-based biotech firm’s objections to Elan’s deal announced last month with affiliates of health products giant Johnson & Johnson (NYSE:JNJ).

Elan’s deal with Johnson & Johnson gives Elan the option to get financing from J&J to acquire Biogen’s rights to natalizumab if Biogen is acquired or undergoes some other change of control, according to Elan. And, according to Reuters, Elan’s $1.5 billion deal with J&J also gives J&J the option to purchase Biogen’s 50 percent stake in the Tysabri business if there’s a change in control at Biogen. Biogen has told Elan that Elan’s deal with J&J breaches the partnership agreement for the drug between Elan and Biogen. Elan disagrees. A Biogen spokeswoman wrote in an e-mail that the company has no comment about Elan’s recent legal action. The lawsuit Elan filed in federal court in New York seeks “declaratory and injunctive relief” that essentially confirms that Elan’s deal with J&J complies with its collaboration agreement with Biogen.

Biogen has been the subject of buyout rumors in recent years, and in late 2007 ended an official search for a buyer after the activist investor and Biogen shareholder Carl Icahn pushed for a sale of the company: Biogen said that December that it didn’t receive any qualified acquisition bids during the sales process. Biogen’s collaboration with Elan has factored into such buyout discussions, at least in part because of the importance of natalizumab to Biogen’s business. The drug, which generated $588.6 million in 2008 revenue for Biogen, is one of the company’s top three products, along with MS drug interferon beta-1a (Avonex) and rituximab (Rituxan) for rheumatoid arthritis and non-Hodgkin’s lymphoma. Biogen and Elan, which discovered natalizumab, entered their development and marketing agreement in 2000.

Elan issued a statement that said: “This is the same agreement we have been operating under for the last nine years. It is unfortunate that, because of Biogen Idec’s actions, Elan was left with no alternative but to seek court intervention to protect its interest.”

Biogen markets natalizumab for multiple sclerosis in the U.S. and Europe, and Elan has responsibility for selling the drug in the U.S. for the intestinal disorder Crohn’s disease. Biogen has said in previous financial reports that it has pinned much of its near-term revenue growth on increased sales of natalizumab.

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