Transition Therapeutics Inc announced on Monday it will receive a $5 million landmark payment from Ireland's Elan Corp as Phase II of the testing of its Alzheimer's drug ELND005 (AZD-103) begun.

The Phase II consists of a clinical study which will be carried out on approximately 340 patients in North America and will take about a year and a half, Elan said in a statement.

In connection with the start of the Phase II clinical study, Transition will also issue former shareholders of Ellipsis Neurotherapeutics Inc 174,123 common shares at a price of $10.86 per share, the company said. The financial terms associated with the acquisition of ENI were previously disclosed in a press release dated March 13, 2006.

Transition bought Ellipsis in March 2006.

ELND005, an orally-administered agent which helps in the treatment of mild-to-moderate Alzheimer’s has received fast-track approval from the US Food and Drug Administration.

Alzheimer's disease (AD), also known as Alzheimer disease or simply as Alzheimer's, is a neurodegenerative disease that, in its most common form, is found in people over the age of 65. Approximately 24 million people worldwide have dementia of which the majority (approximately 60%) is due to Alzheimer's.

Clinical signs of Alzheimer's disease are characterized by progressive cognitive deterioration, together with declining activities of daily living and by neuropsychiatric symptoms or behavioral changes.