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Biotech—No layoffs are expected in Elan-Dura Pharmaceuticals merger

Analysts said the $1.8 billion acquisition of Dura Pharmaceuticals, Inc. by an Ireland-based drugmaker is a good deal for Dura shareholders.

Elan Corp., Ireland’s largest drugmaker, said Sept. 11 it bought the San Diego-based company to gain access to its 500-person sales force and Spiros Development Corp.’s inhaler technology, which if successful, could yield a multibillion-dollar payoff, according to one analyst.

Dura officials wouldn’t comment on the acquisition, citing they are in a “quiet period” mandated by the Securities and Exchange Commission.

David S. Kabakoff, former president and CEO of Spiros Development Corp. in San Diego, however, said the deal is good for Dura shareholders and employees.

Kabakoff, who is now a consultant for Dura, said as far as he knows no layoffs and consolidations are planned.

Cam Garner, chairman and CEO of Dura, said in a written press release the merger will make it a “major global player in the pharmaceutical industry.”

Two analysts find the deal is a good fit for both firms.

Under the agreement, Dura investors will receive 0.6715 of an Elan American depositary receipt for each share held, worth about $35.

That is 22 percent more than Dura’s closing price Sept. 8.

Troubled Firm

“Dura struggled last year,” said James McCamant, editor of the Berkeley-based Medical Technology Stock Letter. “This is a good fit for both companies.”

Another analyst, Thomas DesChamp from Mehta Partners in New York, said Dura was an attractive buy, especially in light of its recently implemented restructuring efforts to cut costs.

DesChamps said while Dura’s sales force of 500 individuals is its strongest asset for Elan, one shouldn’t underestimate the potential for Dura’s inhaled-insulin project.

He sees a multibillion-dollar marketing potential for Dura’s Spiros delivery system, an inhaler used to administer drugs such as insulin for diabetes.

Dura has been working on an insulin inhaler with Eli Lilly and Co. in New York.

If successful, DesChamps said the upside for Elan is great.

An Elan spokesman confirmed that the Spiros technology will be added to the firm’s drug delivery portfolio.

Dura also has other therapy lines, including antibiotics and treatments for respiratory illnesses that will be attractive to Elan.

That includes Maxipime, an already-approved antibiotic drug that Dura bought from Bristol-Myers Squibb. The drug is one of the most successful antibiotics on the market, analysts said.

New Possibilities

Max Gershenoff, an Elan spokesman in New York, said Elan is known for keeping operations intact and for creating synergies following acquisitions.

“We don’t expect to move anyone, lay anyone off or dismantle operations,” Gershenoff said.

McCamant also gave Elan’s image a thumbs up: “Elan understands how people do business in the biotech world.”

This year, Elan bought three firms, including Dura. The other two firms are New Jersey, N.Y.-based Liposome Co., Inc., which makes therapeutic products to treat cancer, and Pomezia, Italy-based Segix Italia, which makes drugs for heart disease and neurological disorders.

Elan, which until recently had focused on drug-delivery technologies, didn’t rank among the top 100 pharmaceutical firms in terms of 1999 sales, according to published reports.

The company hopes the newly acquired medicines will break the barrier into the ranks of the world’s leading drugmakers.

Dura’s buy gives Elan double the sales force in the United States and thus, easier and faster access to hospitals and doctor’s offices nationwide, Gershenoff said.

Dura, one of the few profitable biotech firms in San Diego, had $301 million in sales last year, up from $199 million in 1998.

Last year, the company booked $30 million in net income. Dura said in January it held $274 million in cash.

Elan will pay about $1.6 billion in stock and assume about $200 million in Dura’s debt, Elan said.

Dura shares rose $3, closing at $31.63 on Nasdaq on Sept. 11. American depositary receipts for Elan fell $3.19 to close at $48.94 on the New York Stock Exchange.


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