1/9/2013 8:31:52 AM
“The whole is greater than the sum of its parts,” goes the famous quote attributed to Aristotle. But biotechnology company Elan didn’t see it that way when it split up its business units recently. In late December, Elan (NYSE: ELN) of Dublin, Ireland spun off its early stage drug discovery unit, now named Prothena, (NASDAQ: PRTA). Elan concluded that the two separated companies would each be worth more alone than they would be together. Prothena’s research unit is based in South San Francisco, though the company is incorporated in Ireland. Elan has been streamlining its operations over the past year, selling most of its stake in its former manufacturing business, reducing debt, and phasing out its once substantial R&D facility in South San Francisco. The “demerger’’ of the Prothena discovery science unit leaves Elan free to focus further on increasing revenues for its flagship product natalizumab (Tysabri), the multiple sclerosis drug it co-markets with partner Biogen Idec (NASDAQ: BIIB). Elan, whose revenues on US sales of Tysabri in the third quarter of 2012 were $230.5 million, expects to become profitable through the demerger and other moves. Prothena’s early R&D costs won’t be counted among Elan’s operating expenses, and Elan will also reduce its tax burden through phased deductions for accumulated losses of about $4 billion. So, Prothena now stands on its own—an unusual discovery-stage startup that was launched as a publicly traded company with a rich initial fund of $125 million from its former parent company. Elan, which contributed cash and IP to Prothena, retains an 18 percent interest in the newly created company, whose other shares went to Elan shareholders. Each received one share of Prothena for every 41 shares they held in Elan.
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