Biogen Idec (BIIB) received good news yesterday in the form of a favorable court ruling in its dispute with partner Elan Corp. PLC (ELN) regarding their 10-year collaboration for multiple sclerosis drug Tysabri.

As a reminder, Elan took Biogen to court in early August 2009 in order to prevent Biogen from gaining control over Tysabri. Soon after, Johnson & Johnson (JNJ) signed an agreement to acquire an 18.4% stake in Elan for $1.5 billion, Biogen claimed that Elan has breached the collaboration agreement between the two companies for Tysabri.

In addition to its 18.4% stake in Elan and a majority stake in Elan’s Alzheimer’s disease pipeline, J&J reportedly received an option to acquire Elan’s 50% stake in Tysabri, if there is a change in ownership at Biogen.

Yesterday’s ruling found that although the deal did not result in an assignment of rights to J&J, it did involve a breach of the company’s contract with Biogen for Tysabri. Elan has been given 23 days to correct the breach or it could lose its rights to Tysabri.

The favorable court ruling is a major positive for Biogen. Had the ruling gone against it, Biogen would have been in a tight spot as Elan could have played a key role in any takeover deal involving Biogen. This is because any party interested in Biogen would have had to discuss the Tysabri rights with Elan.

More specifically, J&J would have been in an advantageous position, as no company would be interested in Biogen without Tysabri, which is expected to record more than $1 billion in revenue in 2009.

We believe Biogen has the best pipeline in all of biotech and could be an attractive takeover candidate for pharma companies interested in biologics. We have a Neutral rating on the stock.
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