Business Editors/Health/Medical Writers
DUBLIN, Ireland–(BUSINESS WIRE)–May 20, 2003
Elan Corporation, plc (NYSE: ELN) today announced that it has reached an agreement with King Pharmaceuticals, Inc. (NYSE: KG) (”King”) to settle the pending lawsuit relating to the previously announced sale of Elan’s primary care franchise (principally its rights to Sonata(TM)(zaleplon) and Skelaxin(TM)(metaxalone), related inventory and rights to enhanced formulations of these products) to King.
Pursuant to the settlement, Elan and King have agreed to proceed with the primary care transaction on the terms outlined in this news release and suspend their lawsuit pending the closing of the transaction. Effective on the closing, all claims under the lawsuit will be released and the parties will dismiss the lawsuit with prejudice.
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Terms of Amended Transaction
— Gross consideration to be paid by King on closing of
approximately $750 million, which sum includes the transfer of
Sonata and Skelaxin inventory with a value of $40 million and
includes product related liabilities for Sonata of
approximately $218 million to be assumed by King at closing
(assuming a closing date of June 30, 2003).
— Elan will receive an additional $25 million milestone payment
on January 2, 2004, contingent on the ongoing patent
exclusivity of Skelaxin. zanaflex.
— Elan to receive payments of 5% of net sales of the current
formulation of Skelaxin through December 31, 2005 and,
thereafter, beginning in 2006 and continuing through December
3, 2021, Elan will receive payments of 10% of net sales of the
current formulation of Skelaxin in excess of $50 million
annually.
— King to deposit $400 million in escrow to be released on the
earlier of the closing of the transaction, termination of the
revised agreement, subject to certain conditions, and October
24, 2003.
— Elan to receive up to an additional $61 million in milestone
payments (comprising up to $86 million in clinical, regulatory
and sales milestones less up to $25 million in milestones that
Elan is obligated to pay a third party) relating to the
development of enhanced formulations of Sonata, contingent on
the achievement of certain clinical and regulatory events.
— King to offer employment to Elan’s primary care employees
(approximately 375 employees).
After giving effect to the amended terms of the transaction, the closing of the primary care transaction will result in the following:
— Cumulative consideration received by Elan from asset
divestitures of approximately $1.6 billion.
— Total contractual and potential future payments reported at
March 31, 2003 have been reduced from approximately $3.1
billion to approximately $2.6 billion, reflecting the
elimination of approximately $443 million of contractual and
potential future payments related to Sonata and Pharma
Operating Ltd. (”Pharma Operating”), a wholly-owned subsidiary
of Pharma Marketing Ltd. (”Pharma Marketing”).
— Total cash balances at March 31, 2003 increased by
approximately $312 million to approximately $1.3 billion,
reflecting net cash proceeds from the primary care transaction
after giving effect to the elimination of contractual and
potential future payments related to Sonata and Pharma
Operating and a final payment of $20 million in respect of
Sonata payable by Elan to Wyeth.
— Transaction expected to result in a pre-tax gain of
approximately $35 million, after taking account of a $200
million charge related to the purchase of royalty rights
attaching to Sonata from Pharma Operating, the transfer of
related inventory to King and transaction costs.
Kelly Martin, President and Chief Executive Officer said, “The agreement to settle this lawsuit clears the way for us to close the sale of our primary care franchise to King. Moreover, the new, amended agreements enable us to participate in future revenue streams on sales of Skelaxin. The successful resolution of this matter will represent an excellent outcome for Elan and our shareholders.”
Martin concluded, “Upon closing, Elan will have exceeded its target of raising $1.5 billion from asset divestitures. We continue to move forward on multiple aspects of our recovery plan, including the advancement or our science and product development, the simplification of our balance sheet and the further adjustment of our operating construct in terms of costs, locations, personnel and strategic focus.”
Pharma Marketing
As previously announced on January 30, 2003, Elan and Pharma Operating have agreed that, contingent on closing of the sale of Sonata, Elan expects, on the closing date, to pay Pharma Operating an estimated $200 million ($225 million less royalty payments on all related products paid or due to Pharma Operating from January 1, 2003 to the closing of the sale estimated at $25 million based on a closing date of June 30, 2003) to acquire the Pharma Operating royalty rights with respect to Sonata and the Prialt(TM) product.