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ELAN SEEKS TO HARVEST GREATER RETURN FROM R&D SPADEWORK: LOOKING AT JOINT VENTURE APPROACH TO MARKETING STARTING WITH CHEMIE LINZ IN W. GERMANY, FRANCE

Executive Summary

Elan is looking to begin marketing its products through joint ventures with established pharmaceutical firms in the U.S., Europe and Japan, the Irish drug company disclosed in a recent prospectus covering a 2.1 mil. share offering in the U.S. As opposed to traditional licensing arrangements, the joint venture approach to marketing "offers an opportunity to sell certain Elan-developed products in significant markets, while retaining a measure of control and a larger share of the overall product profits," the prospectus explains. "Joint ventures should also reduce the costs and difficulties of entering new markets if Elan's partners have an infrastructure and sales force in the respective markets." In January, Elan announced that it had reached an agreement in principle with Chemie Linz to form joint ventures in W. Germany and France to market Elan products using the Austrian firm's sales forces in those countries ("The Pink Sheet" Feb. 3, "In Brief"). The joint venture with Chemie Linz will focus on marketing Elan products that make use of the firm's PharmaZome controlled release technology, as well as pediatric formulations, the prospectus notes. "Discussions have also taken place with a view to forming joint ventures or other partnership type arrangements, in the U.S., Japan and certain other European countries," Elan added. In its past licensing and contract R&D agreements, Elan has kept the door open for future marketing of some of its R&D products through nonexclusive licensing arrangements in certain markets. The prospectus notes that in 1984, Elan formed a wholly owned subsidiary, Elan Pharma Ltd., "which has begun to exploit the marketing opportunities" available to the company under these nonexclusive licensing agreements and during fiscal 1985, distributors were appointed in certain Pacific Rim countries. Product sales are already underway in the Philippines, Singapore and Hong Kong, and are expected to begin in Taiwan, Thailand and Korea during fiscal 1987, Elan said. Product licenses remain Elan's primary marketing vehicle, however. Elan has entered into a total of 45 licensing agreements with 30 different clients. Currently, NDAs for four compounds developed by Elan are pending at FDA, including applications for sustained release forms of diltiazem, quinidine, methyldopa and verapamil. Regulatory approval has been received to market seven compounds in countries outside the U.S., Elan said. During 1986, Elan expects to file three PharmaZome product applications in the U.S. "An FDA filing on theophylline is expected shortly, and filings on potassium chloride, if necessary, and acetaminophen are expected to be made in the latter part of 1986," the prospectus states. The PharmaZome technology, first announced by Elan in fiscal 1985, has controlled release applications for medicines in liquid form. Elan Looking To Raise Over $25 Mil. With Second Public Offering In U.S. To increase PharmaZome's commercial potential, Elan has entered into a joint venture with Product Resources International to develop compounds making use of both the PharmaZome technology and Product Resources' "edible whip" technology ("The Pink Sheet" Feb. 3, "In Brief").The prospectus notes that a theophylline product, which has been tested in humans, has been licensed by the joint venture to a U.S. company. In addition, the company has developed and is testing the "Multidirectional Oral Drug Absorption System." This technology consists of a tablet core surrounded by a differentially permeable membrane, which allows the entry of water and the exit of a drug through numerous small pores at a rate controlled by the membrane's composition. Other systems under development include the "Hydrodynamic Cushion," a tablet that can deliver more drug than a capsule and can be made tamper resistant for OTC use, and an electrically assisted transdermal delivery system. Elan is also studying other controlled release technology in addition to PharmaZome. The company has developed the "Insoluble Drug Absorption System" (INDAS) to enhance the solubility of compounds whose insolubility characteristics make controlled absorption difficult. The prospectus notes that during fiscal 1986, Elan developed INDAS formulations of hydergine, nifedipine, nicardipine and "a new calcium channel blocker." The proposed offering of 2.1 mil. American Depositary Receipts is expected to raise approximately $26 mil., based on a proposed maximum offering price of $12.44 per share. Elan stock closed at 13-5/8 on June 20. Elan said that the proceeds of the offering will go toaward "expansion of sales and marketing organization through joint ventures, purchase of additional production facilities and equipment, possible acquisitions and additional working capital." Merrill Lynch, Drexel Burnham Lambert, and Swegold Chefitz and Sinsabaugh are comanaging the deal. (FOOTNOTE) n1 During Stage 3 the company adapts products for commercial production. Release patterns in humans are confirmed through additional testing in human volunteers, stability tests are performed and documentation is collected for FDA or other regulatory submissions. n2 During Stage 2 pilot batches are produced, quality control tests are performed and the compounds are tested on human volunteers to determine bioavailability. This process is repeated many times to obtain a superior dosage form.(END FOOT)
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