Elan Corporation, plc announced an agreement with Eisai Co., Ltd. for the purchase of Elan's interests in Zonegran (zonisamide) in North America and Europe.
Elan president and CEO Kelly Martin said, "This transaction further aligns Elan's strategy in research, development, sales and marketing with our therapeutic areas. In research, it sharpens our focus in neurology, in which we continue research and advances in neurodegenerative diseases, including multiple sclerosis, Alzheimer's disease, and Parkinson's disease. In development, sales, and marketing, it enables us to focus our resources on the expected launch of our late-stage pipeline candidates, Antegren for multiple sclerosis and Crohn's disease, and Prialt for severe pain. In addition, the agreement creates an opportunity for Eisai to leverage the potential for Zonegran."
Zonegran is an anti-epileptic drug approved by the U.S. Food and Drug Administration in March 2000 as adjunctive therapy for the treatment of partial seizures in adults with epilepsy. Zonegran is commercially available in 25 mg, 50 mg, and 100 mg capsules. Zonegran was developed in Japan and in the United States by Dainippon Pharmaceutical Co., Ltd. of Osaka, Japan. Elan licensed the sales and marketing rights for Zonegran from Dainippon for North America and Europe, and these rights will be transferred to Eisai.
Under the terms of the agreement, if the transaction closes by April 30, 2004, Eisai will pay Elan total consideration of approximately $130 million for Elan's interests in Zonegran in North America and Europe. Elan's interests comprise U.S., Canadian, Mexican, and European rights to Zonegran, along with related assets and liabilities, Zonegran inventory with an estimated value of $26 million, and the associated sales team of approximately 115 employees.
If the transaction closes after April 30, 2004, the amount paid to Elan will be adjusted downward. In addition, Elan may earn future deferred purchase payments of up to $110 million, primarily contingent on when generic zonisamide is introduced in the U.S., and including up to $25 million contingent on receiving marketing approval for Zonegran in Europe. Elan will also receive additional deferred purchase payments on net sales of Zonegran in North America and Europe if certain additional conditions are met.
Elan will continue to manufacture Zonegran in all three dosage strengths of 25 mg, 50 mg, and 100 mg capsules in Athlone, Ireland.
Based on a closing by April 30, Elan expects to record a pre-tax gain of approximately $25 million from this transaction, after writing off the intangible assets related to Zonegran, a payment of $17 million to Dainippon Pharmaceutical Co., Ltd. for the assignment of the Zonegran North American and European license agreements to Eisai and other transaction costs. Additionally, Elan expects to record further pre-tax gains of up to $110 million on receipt of future milestone payments. For the full-year 2003, Elan recorded net revenue and gross profit for Zonegran of $80.7 million and $59.4 million, respectively.
The transaction is subject to regulatory approvals, third party consents and other customary conditions, and is expected to close before the end of second quarter 2004. The proceeds of this transaction will be used for development and potential launch of late-stage pipeline candidates.
As a result of this transaction and the Vernalis transaction announced earlier, negative EBITDA guidance for 2004 will change from the range of negative $150-170 million to negative $180-200 million, and product revenue guidance for 2004 will decrease from $575-625 million to $475-525 million. This guidance does not include any additional costs, which may be substantial, that may be incurred from anticipated early filings and potential launch preparation for Antegren for multiple sclerosis in the U.S. and Europe.