Elan Corp rejects increased offer from Royalty Pharma

The board of Irish neuroscience-focused biotechnology company Elan Corp has once again rejected an increased offer from Royalty Pharma and has hired Citigroup Inc to assess other unsolicited interest from other parties.

With an eye on Elan's lucrative royalties from the multiple sclerosis drug Tysabri, New York-based Royalty Pharma last week raised its offer from $12.50 a share to $13 per share and added a contingent value right worth up to $2.50 per share if Tysabri hits certain sales milestones, taking the deal value to a potential $8 billion.

Royalty said the CVR clause would come into effect if Tysabri owner Biogen Idec is able to get approval for using the drug for treatment in secondary progressive MS before end 2017.

Royalty's offer is contingent on Elan shareholders voting against the $1-billion Theravance and two smaller buyouts of privately-owned drug companies, and a £200-million share buyback programme that Elan has proposed.

''Royalty Pharma's revised offer continues to grossly undervalue Tysabri,'' Elan's board said in a statement. ''The Elan board and executive management remain unanimous in recommending the four previously announced transactions.''

Elan said that it has received several unsolicited corporate enquiries, which it did not name, and has ''instructed its advisors to assess any and all strategic interests in the company that reflect the intrinsic value of the totality of Elan's business platform.''

''Both the board and executive management are aligned in exploring all opportunities that maximize the full value of the company for its shareholders,'' it added in the statement.

The bitter takeover battle began in late February soon after Elan announced that it had 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 $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 Tyasbri deal, 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.

Elan had earlier rejected two bids from Royalty saying that it undervalued the company, and started using the $3.25 billion it received from the sale of Tyasbri for buying back shares worth $1 billion and offering 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.

Elan shareholders are scheduled to vote on the deals, but Elan stopped Royalty Pharma rajuku

from closing its earlier $12.50 a share tender offer by obtaining a temporary restraining order, while the Irish Takeover Panel ruled that if Elan shareholders backed the proposed share buyback and other deals, Royalty would have to walk away from the transaction.

Founded in 1996, Royalty holds rights 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.