NEW BRUNSWICK, N.J. (AP) -- Johnson & Johnson said Thursday it will take an 18.4 percent stake Ireland-based drug developer Elan Corp. with a $1 billion investment. The news sent Elan's shares soaring.

Johnson & Johnson also is acquiring Elan Corp.'s stake in its Alzheimer's disease treatment partnership with Wyeth, and rolling it into a new Johnson & Johnson company that will be 49.9 percent owned by Elan. The partnership develops drugs intended to engage the patient's immune system to fight the brain-destroying disease.

Johnson & Johnson is buying 107.3 million newly issued American Depositary Receipts at $9.32 each, which represents a 33 percent premium from Wednesday's closing price. In morning trading, Elan's U.S. shares surged $1.08, or 15.4 percent, to $8.08.

Elan's Alzheimer's program has four drug candidates in clinical or preclinical testing. Johnson & Johnson will gain all rights to drugs developed by the program, and it plans to commit up to $500 million for development of bapineuzumab, a drug that intended to slow the progression of mild to moderate Alzheimer's disease. Current drugs treat the symptoms of the disease but don't slow the advance of the damage it causes.

Last summer, Elan and Wyeth reported promising early results from a mid stage study of bapineuzumab, but full results were somewhat disappointing. The drug appeared to be ineffective for patients who had a gene that is found in about half of Alzheimer's patients and makes the disease more severe. The drug is in late stage testing now.

Elan will get 49.9 percent of the profits from the company, and royalty payments on sales. It said the deal will allow it to become profitable by the end of 2010, and reduce its debt by about 70 percent to about $400 million. The company said it held discussions with 30 companies before reaching an agreement with Johnson & Johnson.

Elan said there are about 5.3 million Alzheimer's patients in the U.S., and estimated that there will eventually be a market of more than 100 million patients worldwide.

The boards of both companies have approved the deal, and expect it to close before the end of 2009, pending approval from antitrust regulators. The acquisition will reduce Johnson & Johnson's profit by 2 cents to 3 cents per share this year.

Elan reported $113 million in losses associated with the Alzheimer's immunotherapy program in 2008. The company said it will update its annual forecasts later this month, when it makes its second-quarter report.

Shares of Johnson & Johnson slipped 80 cents to $56.27.