The board of Elan ($ELN) recently waved off an $11-a-share buyout offer from Royalty Pharma as "highly conditional" and told the group to come back when it had something more concrete to talk about. Now Royalty is back with a rock-solid, all-cash $12-a-share offer and a bit of dismissiveness in its own talk.
"Royalty Pharma believes Elan stockholders will welcome the offer, as an alternative to the high-risk strategy outlined by Elan's management," the New York-based company said in a statement today.
That strategy is for the management of Elan to invest in new assets much of the $3.25 billion in cash it is getting for selling full ownership of the multiple sclerosis drug Tysabri to its partner Biogen Idec ($BIIB). 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. Nearly all of Elan's investors last week approved that plan. Shareholders are also slated to get a divided tied to the royalty stream that Elan would be paid by Biogen based on Tysabri sales levels.
Royalty today told Elan shareholders that in its view the offer from Elan management would potentially pay them less than $1.704 a share, "while asking for free rein to spend a potential $4.4 billion war chest on an unknown mix of companies and products." And it asked them to consider the fact that Elan's management has no experience buying assets or managing them. Royalty said today that it believes its $12/share offer puts a value of $4.4 billion on the Tysabri royalty, which it says is an $800 million, 23% premium over its first proposal.
According to Bloomberg, Royalty's business since 1996 has been to buy and manage royalties paid for various drugs. It currently has royalty interests in 37 pharmaceutical products, including a royalty interest in Amgen's ($AMGN) Neupogen drug that it bought bought from Memorial Sloan-Kettering Cancer Center.
Editor's Note: The story was updated to reflect that Royalty Pharma says its offer put a $4.4 billion value on the royalty stream for Tysabri, which it says is an $800 million, 23% premium over its first proposal.