Elan shareholders approve share-repurchase program jeopardising Royalty’s bid

Shareholders of Irish drug firm Elan Corp today approved a share-repurchase program, delivering a blow to a $6.7-billion hostile bid from US-based Royalty Pharma.

Dublin-based Elan said shareholders approved its $200 million share buyback, but rejected three other transactions, including the proposed $1-billion deal with US biotech company Theravance Inc, the proposed acquisition of Vienna-based AOP Orphan Pharmaceuticals for $340 million and taking a 48-per cent stake in Dubai-based NewBridge Pharmaceuticals for $40 million.

Shareholders also rejected the board's plan of selling one of its drugs under clinical trials, which is designed to manage aggression in patients with Alzheimer's disease and Down's syndrome, to Speranza Therapeutics.

Royalty, based in New York, last month had sweetened its takeover offer by 12 per cent to $6.4 billion on the condition that Elan shareholders reject all the four deals including the share buyback at a meeting scheduled for today. (See: Royalty Pharma raises offer to $6.4 bn for Irish drugmaker Elan)

Elan, which says that it is worth around $20.80 a share, had rejected Royalty's revised offer but said that it would conduct a sale process since it has received other proposals.

The takeover battle began soon after Elan sold its interests in its multiple sclerosis treatment drug Tysabri in February to its US partner Biogen Idec for $3.25 billion plus multi-tiered future royalties on sales of the drug.

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, and since then, bought back shares worth $1 billion and proposed four other deals in a bid to thwart Royalty.

Royalty's current bid offers $13 in cash per share as well as a "contingent value right" that could add a further $2.50 per share if Tysabri achieves certain sales milestones.

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.