Ireland’s Elan rejects Royalty Pharma’s sweetened $6.4 bn bid

Irish neuroscience-focused biotechnology company Elan Corp yesterday rejected Royalty Pharma's sweetened $6.4 billion bid, saying that the revised offer continues to grossly undervalue the company and its future prospects.

New York-based Royalty Pharma, which buys royalty streams of patented drugs, on Monday raised its hostile bid from $11.25 per share to $12.50 per share on condition that Elan shareholders vote against several recent proposed transactions made by the Dublin-based firm.

Royalty Pharma also lowered the acceptance bar for its latest offer from 90 per cent to 50 per cent plus one share.

Elan chairman, Robert Ingram, said that the offer was "an opportunistic attempt to acquire our company at a substantial discount at our shareholders' expense."

Royalty Pharma has been chasing Elan after the drug maker sold its interests in its multiple sclerosis treatment drug Tysabri to its US partner Biogen Idec for $3.25 billion plus multi-tiered future royalties on sales of the drug. (See: Biogen Idec to pay Elan Corp $3.25 bn plus for full rights of multiple sclerosis drug Tysabri)

The deal will not only give Royalty Pharma the $2.25 billion from the sale of its drug Tysabri to Biogen and continued cash flow from the multi-tiered royalties it will receive in the future from Biogen.

According to the terms of the Elan-Biogen deal on Tyasbri, Elan will receive a royalty of 12 per cent of Tysabri's global net sales for the first 12 months, and then 18 per cent on up to $2 billion of global net sales and 25 per cent on any sales over that amount. 

But Elan had snubbed Royalty Pharma's initial offer in February, and since then, bought back shares worth $1 billion and offered to pay $1 billion to US-based biotech company Theravance for 21 per cent of future royalties on four of its experimental respiratory medicines developed in partnership with GlaxoSmithKline

Elan also proposed acquiring two small rare disease drugmakers for $380 million, selling one of its drugs in development, buying back $200 million in shares, and issuing $800 million of debt.

Royalty Pharma believes that Elan has overpaid in the Theravance transaction by agreeing to pay $1 billion for 21 per cent of selected royalties when all of Theravance was trading at $3.5 billion.

Founded in 1996, Royalty Pharma holds rights to 37 approved and marketed pharmaceutical products, including Johnson & Johnson's Remicade, Merck's Januvia, Sloan-Kettering Cancer Center's US royalty interest in Amgen's Neupogen drug and Gilead's Atripla.

The company had sales $1.39 billion last year.