Elan Board Rejects Multibillion Takeover Bid from Royalty Pharma

The board of directors and executive management of the pharmaceutical company Elan have rejected a revised bid of $15.50 a share or approximately $8 billion by the pharmaceutical company Royalty Pharma. In turning down the bid, Elan says the offer undervalues the company and has urged Elan shareholders to reject the bid in a shareholder meeting to be held on June 17, 2013.

Royalty Pharma made an unsolicited revised bid to acquire all the shares of Elan for $13.00 per share plus up to an additional $2.50 per share in contingent value rights for a total bid price of $15.50 a share. In rejecting the bid, Elan said in a June 11, 2013 statement the offer was “wholly inadequate for Elan shareholders,” and in a letter to its shareholders, urged them to reject the offer at an upcoming extraordinary general meeting to be held on June 17. A key point of contention is the valuation of Elan’s participation in the multiple-sclerosis drug Tysabri (natalizumab). Earlier this year, Elan restructured its collaboration with Biogen Idec for Tysabri, in which Elan received a $3.25-billion payment plus an ongoing royalty interest in the drug. Elan says that the royalty and cash alone value Tysabri to be worth at least $15.50 per share or as much as $20.80 per share, thereby undervaluing Elan by as much as $4.3 billion.

In addition to voting on the Royalty Pharma offer, Elan shareholders will also be voting on whether to approve three earlier deals of Elan: a $1-billion deal with the US pharmaceutical company Theravance that was announced in May 2013; a proposed EUR-263.5 million ($350-million) acquisition of AOP Orphan Pharmaceuticals, a Vienna-based pharmaceutical company focused on rare and orphan diseases; and the divesture of Elan’s ELND005, a drug in clinical development for treating separate indications of Alzheimer's disease and bipolar disease, to Speranza Therapeutics. In the Theravance deal, Elan would pay $1 billion in a royalty-participation agreement in which Elan would receive a 21% stake in potential future royalty payments related to four respiratory programs in which Theravance is partnered with GlaxoSmithKline.

Elan’s board and executive management said it is “exploring all opportunities that maximize the full value of the company for its shareholders” and that it will consider other offers for the company.

In response, Royalty Pharma issued a statementto say that subsequent deals by Elan, including the deals involving Theravance, AOP, and Speranza, as well as share repurchase transactions “do not come close to replacing the earnings that Elan gave up by selling half of its Tysabri interest,” and urged Elan shareholders to vote against the resolutions at the upcoming shareholders’ meeting.