It's all about choices. It is a week before shareholders will decide whether to let run with the current management or cash in on the sure deal offered by Royalty Pharma, but Elan Pharmaceutical investors have a handful of choices to sort through before they vote.
In the nearly daily update to the back-and-forth between the Irish drug company and its pursuer, the Elan board today rejected Royalty's latest offer, a $13-a-share bid that one analyst called a game-changer and that could lead to a value of $8 billion on Elan. Elan's board, however, repeated its refrain: "Royalty Pharma's revised offer continues to grossly undervalue Tysabri," it said in a statement. "The Elan board and executive management remain unanimous in recommending the four previously announced transactions."
The vote is June 17, and Elan shareholders will decide whether to go with Royalty, which wants to buy Elan for its royalty stream from multiple sclerosis drug Tysabri. The deals also include whether to allow Elan to proceed with $1 billion investment in Theravance ($THRX) royalties on respiratory drugs from that company's collaboration with GlaxoSmithKline ($GSK).
On Friday, Royalty upped its offer with a bid of $13 per share and a $2.50 CVR, a jump from the previous $12.50 per share offer that the vast majority of Elan shareholders had turned their noses up at. In addition to boosting the initial cash offer, Royalty added the contingent value right (CVR), which is tied to sales and development milestones for the blockbuster multiple sclerosis drug. Royalty's latest offer is also contingent on Elan shareholders rejecting a slate of proposed deals from Elan's management, including Theravance, which have been seen as an effort to derail the takeover.
Elan's strategy is to invest much of the $3.25 billion in cash it is getting from the sale of Tysabri to its partner Biogen Idec ($BIIB) in new assets. CEO Kelly Martin initially said he would take all of that cash for a shopping spree to remake Elan, but when some shareholders balked, the board offered to buy back about $1 billion in shares from investors at between $11.25 and $13 a share. But Guillaume van Renterghem, an analyst at UBS AG in London, told Bloomberg on Friday that he sees the $13 a share offer from Royalty as the "game changer," that will doom the proposals by the Elan board to defeat. "Frankly I doubt very much that shareholders will vote positively for any of the Elan management proposals," he said.
- here's the release
- get more from Bloomberg