Alkermes Inc's acquisition of Elan Corp.'s Elan Drug Technology, announced May 9, more than doubles the revenues of one of the biopharma industry's most successful reformulation companies, and provides it with additional cash flow it needs to pursue a slate of innovative compounds it is developing.

The purchase price is for $960 million ($500 million in cash, and $460 million, or roughly 25% of the combined company, in stock) or roughly three times EDT's sales. In addition, Alkermes is moving its headquarters from Waltham, MA, to Ireland, where EDT is located, partly in order to take advantage of the low tax rate there (Also see "Alkermes Buys Size With Purchase Of Elan Drug Delivery Unit" - Pink Sheet, 9 May, 2011.). The new entity will be called Alkermes Plc.

“The deal is also transformational,” said Alkermes CEO Richard Pops on a conference call with investors. “We believe that Alkermes Plc will be one of the world’s most significant biopharmaceutical companies with a track record of successful drug development and an exciting pipeline of high potential drug candidates.”

But the deal doesn't change Alkermes core business model in the near-term. Alkermes has made a name by developing long-acting formulations of existing compounds, based on its Medisorb technology. It has partnered with major R&D-driven drug companies, which market products that incorporate Alkermes delivery technologies, including several blockbusters in the central nervous system space.

But Alkermes has struggled in early efforts to take a drug through development and commercialization on its own. It sells one internally developed drug, Vivitrol (extended-release naltrexone). Vivitrol, which received FDA approval for reducing alcohol dependence in October 2010, is a long-acting reformulation of an already generic drug, and has enjoyed only moderate success so far.

EDT also is a strong drug delivery company with a swath of technologies that are used to enhance a variety of different drugs. EDT has developed several kinds of oral controlled technologies that are used in 18 commercialized products, as well as its NanoCrystal technology, which makes insoluble drugs soluble by reducing particle size.

The deal also helps EDT's parent, Elan, reduce its sizable current debt load by about a third. The company developed and, with partner Biogen Idec, sells the important multiple sclerosis drug Tysabri (natalizumab) and will continue to work on developing innovative CNS drugs.

But Elan has had difficulty controlling costs and paying down a significant debt; it had tried to sell EDT several times, asking $1 billion, to help offset debt, but withdrew the offer when bids failed to materialize. Elan and analysts attributed that failure to the credit crunch following the 2008 global financial crisis, which created a hurdle for M&A (Also see "A Solution For Elan: It Strikes A Deal With J&J On Key Alzheimer's Assets" - Pink Sheet, 4 July, 2009.).

The Products Driving The New Company

Alkermes Plc will have 25 commercial products to boast of, with five of those accounting for more than half of its revenues:

• Ampyra (dalfampridine), marketed by Acorda Therapeutics, is a potassium channel blocker approved in January 2010 by FDA for treatment of walking disorders in multiple sclerosis patients and is waiting for EU approval. It has patent protection through 2026, and currently generates royalties of 18% of the drug's net sales for EDT. The drug uses EDT’s MXDAS technology, which controls the release of drug through a process of diffusion and erosion in the gastrointestinal tract.
- Vivitrol, Alkermes' proprietary monthly, extended-release formulation of naltrexone, which is also approved for prevention of relapse to opioid dependence ("Can Alkermes' Vivitrol Live Up To Commercial Potential In Opioid Dependence?" "The Pink Sheet" DAILY, Oct. 13, 2010). Alkermes recently was able to extend Vivitrol’s patent protection until 2029. Sales of the drug have gotten off to a slow start, but with the approval of the opioid-dependence indication and a tough sales push by Alkermes, sales have started to pick up. The drug had sales of $500,000 in 2010.
- Bydureon (exenatide), a weekly GLP-1 antagonist for type 2 diabetes that Alkermes is partnered on with Eli Lilly & Co. and Amylin Pharmaceuticals Inc. Alkermes developed the Medisorb technology that allows exenatide (the active ingredient in marketed diabetes drug Byetta) to be turned into a once-weekly injection. FDA issued a "Complete Response Letter," in October, raising concerns about Bydureon's cardiovascular safety. The companies expect to re-file an NDA during the second half of 2011; in April, the EU's Committee for Medicinal Products for Human Use issued a positive opinion, which all but assures EU approval. Bydureon has patent protection through 2025, and the new company will receive an 8% royalty on worldwide sales.
- Risperdal Consta (risperidone), Alkermes' biggest revenue generator, is a long-acting atypical anti-psychotic marketed by Johnson & Johnson. It uses the same Medisorb technology as Bydureon and Vivitrol. About 61% of Alkermes 2010 sales – or $109 million – came from Risperdal Consta; diversification is one of Alkermes' key goals for the acquisition. Post closing, the drug will account for 35% of the new company's revenues.
- Invega Sustenna (paliperidone palmitate) is a once-monthly injectible for the treatment of schizophrenia marketed by Johnson & Johnson as well. The drug is a reformulation that uses EDT’s NanoCrystal technology to make it long-acting. It was approved in the third quarter of 2009 and has been the main competition to Risperdal Consta.

Coming Through Its Pipeline

“The pipeline of Alkermes Plc will build upon the proprietary pipeline we’ve been building so actively here for the past few years and will reinforce our position as one of the most exciting companies in the CNS space,” said Pops.

Yet, virtually all of the commercialized products that the new Alkermes has in its arsenal are other companies’ drugs that utilize its technology, or are reformulations that have been made to act longer by that same technology.

As a way to expand on the schizophrenia franchise of Consta and Sustenna, Alkermes is developing a long-acting reformulation of Bristol-Myers Squibb/ Otsuka’s Abilify (aripiprazole). The compound, ALKS9070, currently is in Phase I and is not yet partnered, but analysts speculate that Bristol (or possibly Otsuka) could strike a deal if data is positive.

Another compound in the company’s pipeline is ALKS 37, an oral opioid receptor antagonist meant to treat opioid-induced constipation. It does not cross the blood-brain barrier and therefore does not cause some of the more adverse side effects. Alkermes reported positive Phase II results in the beginning of 2011 and will push on with development later this year. As an oral compound, it should have clear advantages over the competition, but will be the third drug to enter the market behind Progenics Pharmaceuticals’ Relistor (methylnaltrexone) and Nektar Therapeutics’ NKTR 118, which is in Phase III currently.

As a follow-on to Vivitrol, Alkermes is developing ALKS 33, an oral opioid modulator for the treatment of rewards disorders like alcoholism, binge-eating and cocaine addiction. The company currently is conducting a Phase II study in binge-eating, and plans to initiate a Phase II study for cocaine dependence.

EDT brings a few pipeline drugs to the table as well. The Ireland-based unit is partnered with Zogenix Inc. on ZX002, a reformulated hydrocodone product meant to treat moderate to severe pain in patients who need long-term opioid therapy. The drug uses EDT’s oral-controlled release technology. EDT finished enrolling a Phase III trial in February, with data expected before the end of the year.

EDT also is developing a non-steroidal anti-inflammatory drug (NSAID) called Meloxicam IV for pain that uses its NanoCrystal technology. Phase II studies currently are ongoing.

By Lisa LaMotta

Elan Unit’s Acquisition Brings Diversification, Cash Flow, To Alkermes

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