Johnson & Johnson has cut the amount it will pay for its 18.4% stake in Elan by $115m to $885m.
The new deal resolves a dispute between Elan and its US partner Biogen Idec, with which it sells the multiple sclerosis drug Tysabri in a 50-50 partnership.
But it also shows that the original transaction was not as good to Elan's shareholders as the company had originally represented.
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.
Analysts said that the premium, at roughly 33%, was not great compared with other premiums paid in the biotech sector, which can reach 40-50%. However Elan, which is weighed down by more than $1 billion in debt, was desperate for cash. J&J is one of the biggest healthcare companies in the world.
What neither company revealed when the deal was agreed was that Elan had given J&J an option to acquire a 50% share of Tysabri should Biogen be acquired.
Under their agreement, Biogen and Elan have the exclusive right to acquire full ownership of Tysabri if the other is acquired. The right cannot be transferred or assigned to a third party. Yet that is what Elan effectively did.
When news of the agreement leaked out, Biogen sued, claiming breach of contract. A US judge agreed, saying Elan had transferred control of the right to J&J, despite its attempt to hide and deny it.
Elan tried to play down the importance of what it had done. But cutting the value of the broader transaction has shown that J&J, at least, considered the asset valuable.
If it turns out that Elan's failure to tell shareholders about the agreement was material, Elan could find itself on yet another hot seat.
'Given the relative size of J&J and Elan, this omission appears to be immaterial to J&J, but may be deemed material to the shareholders of Elan,' said Ron Geffner, a former SEC enforcement attorney who is now a partner at Sadis & Goldberg LLP in New York.
What constitutes a material omission is not set in stone, he said. Broadly speaking, if the inclusion of the item would have changed or influenced the judgment of a reasonable person it would likely be considered material.
J&J thought it had walked off with a right that not only would have given it an option to acquire 50% of Tysabri - which is on track to generate sales this year of $1 billion - but would have placed it in pole position to acquire Biogen itself. Now it is not.
Moreover, in squeezing Elan for a discount to an already good deal, J&J risks tarnishing its reputation among future potential biotech partners.
Elan shares closed up 20 cent at €5.43 in Dublin.
