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Royalty Pharma sweetens bid for Elan

Says new offer places $4.4bn value on Tysabri royalties

Royalty pharma logoRoyalty Pharma signalled its determination to acquire Elan by raising its takeover bid to $12-per-share, an offer that values the Irish drugmaker at more than $7bn.

Privately-held Royalty Pharma - which specialises in buying up intellectual property assets in the drug sector and generating revenues from royalty interests - had earlier offered up to $11-per-share for the business.

The interest in Elan was prompted by its transfer of rights to multiple sclerosis therapy Tysabri (natalizumab) to Biogen Idec in a deal that brought in $3.25bn in upfront fees as well as a royalty stream.

The takeover offer is presented as a straight choice for Elan's shareholders. They can either 'cash in' their interest in the company, or put their faith in management to use the cash pile accrued from the Tysabri deal and royalties to invest in and run new ventures.

In a statement, Elan's board said it would "give consideration to any formal proposal by any party" for its business, leading to speculation that it is hoping for a rival offer from a traditional drug development company. 

"The board of Elan will, in line with its obligations under Irish Takeover law, promptly assess the Royalty Pharma announcement and will advise its shareholders accordingly," said the company yesterday.

For its part, Royalty Pharma said its offer places a $4.4bn value on Tysabri royalties, a 23 per cent hike on its earlier offer and 35 per cent more than that paid by Biogen Idec. 

It also said that Elan's senior management lacks experience in acquisitions and in-licensing and the business has no operating assets other than its cash to encourage other bidders to come forward, while any deal would require it to build a "costly operating infrastructure and sales force".

Elan launched a share buyback earlier this month in a bid to return cash to its shareholders and keep them on board, which was supported by more than 99 per cent of investors in the company. The price of the buyback - which accounts for around 15 per cent of issued shares - is due to be announced later this week.

Ireland's Takeover Board has set a deadline of May 10 for the Royalty Pharma bid.

16th April 2013

From: Research, Sales

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