UPDATE 5-J&J buys $1 bln Elan stake, gains Alzheimer's R&D

* J&J buys 18.4 pct stake in Elan for $1 bln

* U.S. group takes over interest in Alzheimer's program

* Relationship with Wyeth to continue

* Elan shares rise 8.6 pct; J&J falls 1.9 pct (Adds J&J, analyst comments; updates share prices)

By Toni Clarke

BOSTON, July 2 (Reuters) - Johnson & Johnson (JNJ.N) has agreed to pay $1 billion for an 18.4 percent stake in Irish drugmaker Elan Corp (ELN.I), and will acquire a major stake in Elan's portfolio of experimental drugs to treat Alzheimer's disease.

The transaction, announced on Thursday, will, among other things, give J&J a 25 percent interest in a closely watched Alzheimer's drug called bapineuzumab, which Elan is developing in a 50-50 partnership with Wyeth. Wyeth is being acquired by Pfizer Inc (PFE.N).

The agreement caps a lengthy battle between Elan and some of its largest shareholders, who had called on Elan to shake up its board, streamline operations and tighten what they considered lax corporate governance.

Last month, the company agreed to nominate two dissidents to its board, including Jack Schuler, a shareholder who publicly called for the resignation of Elan's chief executive, Kelly Martin.