Dividend Stalwart Johnson & Johnson Makes Significant Deal

Johnson & Johnson (JNJ) has made a significant improvement to its business. Under a deal announced Thursday, J&J will take a major stake in biotech company Elan (ELN), thereby gaining access to Elan's Alzheimer's disease treatments, in particular leading drug bapineuzumab.

In the transaction, J&J will take a 50.1% ownership in Elan's Alzheimer's program, plus an 18.4% ownership in the remaining part of Elan. In return, Elan gets a $1 billion equity investment and a $500 million commitment to fund further development and marketing of promising Alzheimer's treatments. The major focus will be on further development of and launch activities for bapineuzumab, which is in Phase 3 clinical trials.

With this deal, J&J expands its presence in neuroscience and gets into the game for effective Alzheimer’s therapies. There are estimated to be tens of millions of Alzheimer’s patients globally, the vast majority of those in emerging markets. Bapineuzumab is one of the most promising treatments to slow progression of Alzheimer's disease. J&J also gets access to several earlier-stage Alzheimer's drugs (Elan has four drug candidates in clinical or preclinical testing), plus a toehold in the market for multiple sclerosis treatments through Elan's drug Tysabri.

J&J also becomes the largest stakeholder in Elan, and the deal effectively closes out other potential Elan suitors. Elan has been widely considered to be one of the most likely biotech takeover candidates. Reportedly it has had talks or inquiries from more than 30 companies.