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Executive Summary

Elan Pharmaceutical is looking for $23 mil.-$40 mil. in additional funding from existing shareholders to develop two new drug delivery systems. Taking advantage of the good publicity generated by the Verelan controlled release verapamil approval and the pending transdermal nicotine project with Warner-Lambert, Elan is trying to raise funds for two early-stage development projects: (1) the IPDAS gastrointestinal protective drug absorption system; and (2) ETDAS "wristwatch" transdermal drug absorption system. The IPDAS technology is intended to minimize adverse effects associated with certain drug therapies that are known to irritate the gastrointestinal system, such as "non-steroidal anti-inflamatory drugs which are used in the treatment of rheumatoid and osteo-arthritis, and various antibiotics, such as certain cephalosporins, penicillins and macrolides, which may be prone to gastric degradation," Elan said. Key features of the IPDAS technology, according to Elan, include "specially produced cores coated with rate-controlling polymers, designed to achieve targeted drug release at specific sites in the gastrointestinal tract." Elan says it has already spent $1.1 mil. on preliminary research, product development and testing of potential products in tablet form. Elan also has spent $1 mil. on the development of ETDAS, a programmable wristwatch-like technology that uses an electrical current to transdermally deliver peptides, narcotics and cardiovascular drugs. In March, Elan announced that it had signed a licensing agreement with the Swiss Corporation for Microelectronics and Watchmaking Industries Ltd. for the technology ("The Pink Sheet" April 16, T&G-8). SMH, of Swatch, Omega, and Longines fame, is currently developing prototypes. The ETDAS products will use disposable drug cartridges manufactured by Elan. The funding proposal is described in a prospectus filed Aug. 8 with the Securities and Exchange Commission. Elan is setting up Drug Research Corporation as the separate fundraising vehicle for the new technologies. Athlone, Ireland-based Elan is offering its shareholders transferable rights to subscribe to 3.9 mil. units, each comprised of one Elan American Depositary Receipt and one Drug Research Corp. ADR. Four rights are required to purchase one unit, and holders of rights may purchase additional units that may be unsubscribed. The ratio of rights to existing shares is one-to-one. The anticipated price per unit is $10 to $11. The offering expires in October and will be cancelled if less than $25 mil. in gross proceeds are raised. Merrill Lynch is advising Elan on the fundraising effort. The DRC offering, the prospectus explains, "affords shareholders the opportunity to choose whether or not they wish to participate in these higher risk development projects and, if such projects are successful, to obtain the potential rewards associated with them." The creative financing effort comes at a time when the first fruits of Elan's drug delivery pipeline are beginning to reach the market. The company's transdermal nicotine patch was approved in Ireland earlier this year and has an NDA pending at FDA. Warner-Lambert has worldwide marketing rights to the patch. The sustained-release verapamil (in Elan's SODAS system) was approved for marketing by Warner-Lambert in late May. Warner-Lambert quickly brought in Wyeth-Ayerst to co-market the product in the crowded calcium channel blocker field. Elan has another formulation in that field: the twice-daily product for Marion Merrell Dow, Cardizem SR.

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