Biogen's purchase of MS drug ends rocky partnership with Elan

BOSTON (Reuters) - Biogen Idec Inc's agreement to buy Elan Corp Plc's interest in the multiple sclerosis drug Tysabri gives Biogen full control of a product that is poised for further growth and ends a long partnership that has often been contentious.

Analysts have speculated for several years that Biogen could acquire Elan to take control of Tysabri. The current agreement, under which Biogen will pay Elan $3.25 billion in cash plus royalties, gives Biogen the asset it is most interested in while leaving Elan with money to spend on acquisitions and to develop its pipeline of experimental drugs.

"With this deal Biogen does not have to deal with Elan's pipeline baggage," said David Ferreiro, an analyst at Oppenheimer & Co.

Still, analysts expressed some surprise that Biogen has chosen this moment to double down on Tysabri. The company is poised to launch a new MS drug, BG-12, at the end of March. The drug, if approved, will be sold under the brand name Tecfidera. It is expected by many investors to become the leading treatment for the disease but is set to lose patent protection in the mid to late 2020s.

"By that point, BG-12 could be the dominant MS therapy. And then it will suddenly go to zero," said Mark Schoenebaum, an analyst at ISI Group.

Oral drugs such as BG-12, also known as small molecule drugs, are easier to replicate than complex, large molecule biologic drugs such as Tysabri that are given by infusion. Schoenebaum said he and many other analysts have believed that for this reason Biogen has wanted to acquire Elan's portion of Tysabri.

"Tysabri is a long duration asset that will never face true small molecule-like erosion," Schoenebaum said, adding that since Tysabri is far more effective than BG-12, "Biogen has taken a step toward filling in the post-BG-12 P&L."

Biogen's chief executive, George Scangos, said in an interview that the timing of the deal was a matter of happy coincidence.

"We've been talking to Elan for a while about how to restructure the relationship in a way that would be beneficial to both companies," Scangos said. "We are doing it now because the interests of both companies are aligned."

The deal also ends a partnership that Scangos described as "cumbersome" but that others say was often hostile.

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Biogen's purchase of MS drug ends rocky partnership with Elan