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Prominent Maker of Drug Delivery Technology Buys Biotech Company

March 18, 1996

NEW YORK (AP) _ Elan Corp., a company known mostly for improving drugs created by others, boosted its own portfolio Monday by buying a maker of medicines for Parkinson’s disease and multiple sclerosis.

Ireland-based Elan said it would buy Athena Neurosciences Inc. of South San Francisco, Calif., for about $638 million in stock.

The deal is one of a long string of mergers in the drug industry. It illustrates Elan’s strategy of diversification as a key to higher profits in an era of cost cutting spurred by HMOs and other managed health care.

Elan is a leader in a pharmaceutical industry niche called drug delivery _ the science of making medicines easier to take. Its U.S. headquarters are in Gainesville, Ga.

It has developed timed-release versions of popular heart disease medicines such as Cardizem, invented by Marion Merrell Dow Inc., so that patients can take just one pill a day instead of three or four.

This spring it will introduce a once-a-day version of the popular arthritis medicine naproxen that doesn’t cause serious stomach aches and ulcers common in many prescription painkillers.

Elan also makes the ProStep nicotine patch, a Band-Aid like device that sticks on the arm and delivers nicotine to the body to help smokers quit.

Its profits rose 20 percent last year to $68 million, not including previous merger expenses, on revenues of $192.6 million.

Despite that success, increased competition has prompted the company to start researching new medicines on its own, or sign research collaboration deals with others.

Last March, Elan signed one such collaboration with Athena, a small biotechnology company founded in 1986. Although Athena has yet to turn a profit, Elan’s managers were impressed with its science enough to buy the company.

``This is a unique opportunity to build a business which is highly complementary with both drug delivery skills and real new molecular research that we think is very significant,″ said Elan president and chief executive Donal J. Geaney.

Athena’s major product is Permax, a drug licensed from Eli Lilly & Co. for Parkinson’s Disease. It also makes a test to help doctors diagnose Alzheimer’s Disease.

Later this year or next, it hopes to get Food and Drug Administration approval for Zanaflex, a drug that controls muscle spasms in multiple sclerosis patients, and Diastat, to treat seizures in a severe form of epilepsy.

It lost $29.8 million last year on revenues of $53.4 million.

Elan will issue new stock in the United States and give Athena shareholders 0.2956 share for every Athena share they own. That values Athena at about $18.25 per share based on Elan’s closing price Friday. Athena’s shares rose $2.12 1/2 Monday to $17.25 on the Nasdaq Stock Market.

Elan’s U.S. shares fell $1.25 to close at $60.50 on the New York Stock Exchange.

Geaney will remain CEO of the combined company. John Groom, president and CEO of Athena, will be chief operating officer and will continue to manage Athena as a separate division.

Executives doubted the merger will cause any major job cuts, saying their businesses had little duplication.

Analyst David Sobell of the Boston securities firm Rodman & Renshaw, said the companies complement each other well, noting that Elan has a strong marketing force overseas, while Athena has good relationships with U.S. neurologists.

``I think it’s a good deal for Elan and for Athena shareholders I also think its a good deal,″ he said.

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