Elan Corporation plc, the Irish listed drugs firm, on Monday announced that it has cured an "unintended breach" of its Tysabri Collaboration Agreement with US partner Biogen, by an agreement with Johnson & Johnson to cut the amount it will pay for its 18.4% stake in Elan by $115m to $885m.

Elan 's previously announced transaction with Johnson & Johnson has been amended to eliminate in its entirety the Strategic Financing and Collaboration Agreement that was the subject of a US court hearing.

In July, J&J agreed to acquire an 18.4% stake in Elan for $1 billion, or $9.32 a share, and it agreed to pay $500m for a majority stake in Elan's portfolio of experimental Alzheimer's drugs.

Johnson & Johnson will acquire substantially all of the business, assets and rights of Elan related to its Alzheimer's Immunotherapy Program, through a newly formed company, Janssen Alzheimer Immunotherapy, and will initially commit up to $500 million to continue the development and launch activities of bapineuzumab, a potential first-in-class treatment that is being evaluated for slowing the progression of Alzheimer's disease, as well as other compounds. In consideration for the transfer of these rights and assets, Elan will receive a 49.9% equity interest in Janssen Alzheimer Immunotherapy. Elan will be entitled to a 49.9% share of the profits and certain royalty payments upon the commercialization of products under the collaboration with US drugs firm Wyeth.

Davy analyst Jack Gorman commented: "The terms of Elan's collaboration agreement with J&J have now been amended to reflect the legal ruling that the terms of the Tysabri financing clause had been in breach of Elan's Tysabri agreement with BIIB.

This controversial clause has now been eliminated and Elan has informed BIIB that the breach has been cured. The other revision is to the up-front cash injection to be made by J&J: the original $1bn has been reduced to $885m (equivalent to 107.3m shares at a buy-in price of $8.25).

The statement does not indicate that any other elements of the transaction have been modified. An initial commitment of up to $500m by J&J will be made in its new subsidiary Janssen Alzheimer Immunotherapy Program (JAIP), the entity that will house the original AIP. Elan will own 49.9% of the subsidiary and will share in 49.9% of profits in addition to its royalty payments on end-user sales.

This brings to an end an unintended complication in the J&J transaction. The parties, and investors, can now move on to assessing the merits of the deal itself, which is set to close 'as promptly as possible'.

We reiterate our 'outperform' rating as we believe that this deal has the potential to transform Elan's earnings and balance sheet profile."