Is JNJ Contemplating a Biogen Takeover?

Johnson & Johnson’s (NYSE:JNJ) investment of $1 billion for an 18.34% stake in Irish drug maker Elan Corporation (NYSE:ELN), raises the question if Biogen Idec Inc. (NASDAQ:BIIB) will be the American health care giant’s next takeover target.

According to a conversation WSJ’s Deal Journal blog had with Elan’s chief financial officer, Shane Cooke, JNJ and Elan have “arrangements in place” relating to Biogen’s drug Tysabri (which treats relapsing forms of multiple-sclerosis and has a $1 bln run rate in net sales globally) it markets with Elan.

Based on the Tysabri deal Elan and Biogen have in place “if either company is approached by a potential acquirer, the other party in the Tysabri partnership has the right to buy the targeted company’s share of Tysabri.” This essentially implies that if a large pharma company wanted to buy a controlling stake in Biogen, Elan would have the right to buy Biogen’s share of Tysabri.

Elan’s Cooke told Deal Journal that his company and J&J have “had discussions” about Tysabri.

“There are arrangements in place that would, could see us working together if there was a change in control to occur” at Biogen, he said in a telephone interview. “We might end up working together to acquire the other half of Tysabri if the circumstances were right,” he said. [DJ]

While there are no indications that talks between J&J and Biogen are currently underway, the fact J&J is having discussions with Elan about one of Biogen’s most valuable products, signals the health care giant’s interest in buying Biogen Idec.

Acquiring Biogen will not be cheap, however. In 2007 U.S. biotech firm MedImmune was bought for  nearly $16 bln by AstraZeneca Plc – equivalent to 11x-annual sales. But then again, if there is a company out there with deep pockets, that’s J&J.

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