Being a shareholder in Elan these days is a bit like taking a multiple choice quiz in an advanced MBA class.
They have just resoundingly approved a buyback plan that will pay them $11.25 to $13 a share, Reuters reports, but then there is the $11-a-share buyout offer from Royalty Pharma on the table. Should they take that cash and run, or should they count Elan management making some savvy pharma investments that will net them much more down the road? Or should they hold out, expecting Royalty to come back with a $12 a share offer?
"If they get to $12, the choice for investors is have you got faith that management can do value-enhancing transactions, do you buy into that story or do you just want cash out now," Deutsche Bank analyst Richard Parkes speculated to Reuters.
The mental gymnastics began last August when the Irish drugmaker's partners Johnson & Johnson ($JNJ) and Pfizer ($PFE) iced a late-stage program to develop its experimental Alzheimer's drug bapineuzumab. That left Elan with multiple sclerosis drug Tysabri and an uncertain future. In February Elan ($ELN) agreed to sell Tysabri to partner Biogen Idec ($BIIB) for $3.25 billion and a stream of royalties on sales of the drug. CEO Kelly Martin initially said he would take all of that cash for a shopping spree to remake Elan but when some shareholders asked 'what about me?' the Elan board decided it had better share some of the windfall. The board came up with the buyback plan but then a few days later, investment group Royalty Pharma came in with its $11 a share offer to buy up the royalty stream on Tysabri for itself.
Elan dismissed Royalty's offer as overly "conditional" Reuters points out, and given it until May 10 to come up with something more concrete. Further complicating the calculations of Elan shareholders is the company's promised "unique cash dividend" that stems from the payments it will receive from Biogen Idec. They call for Elan to get 12% of Tysabri sales the first year, bumped up to 18% after that, unless annual sales exceed $2 billion, in which case it goes up to 25%. Shareholders have been promised 20% of each of those milestones in a dividend.
- here's the Reuters story
Royalty Pharma offers Elan investors a chance to cash out with $6.55B deal
Biogen buys control of Tysabri, leaving Elan in search of a future
Elan faces uncertain future after Alzheimer's drug crash