US investment firm Royalty Pharma yesterday made a $6.6bn (£4.35bn) approach to Irish drugmaker Elan, targeting royalty rights for multiple sclerosis treatment Tysabri worth hundreds of millions of dollars annually.
But Elan described the informal approach as “highly opportunistic”, coming before shareholders could assess its plan to sell off Tysabri.
Elan said earlier this month it was to sell its 50 per cent interest in Tysabri for $3.25bn plus future royalty payments to US partner Biogen Idec, and then planned to reinvent itself with a series of acquisitions.
Royalty Pharma said it made contact with Elan on 18 February, but had not received a formal response from Elan and had been unsuccessful in efforts to engage.
It also said it was surprised by Elan’s 22 February announcement that it planned to return $1bn to shareholders buying back shares, because it did not address the proposed offer.
The US firm, which buys royalty streams of patented drugs and whose was indicative approach was worth $11 per Elan share, said yesterday that after the Biogen Idec deal, Elan would have two material assets – cash and the Tysabri royalty payments.
Royalty Pharma said Elan shareholders would be able to invest cash paid for their Elan stock in other drug companies without paying a premium to gain control, as would likely be the case were Elan itself to buy a controlling stake in a company.
Deutsche Bank analyst Richard Parkes said the small premium suggested by Royalty Pharma might deter Elan’s shareholders.
“But it is not totally unreasonable. Investors are now faced with a straight question of whether you lock in the value at a small discount to asset value or you have faith that management can deliver on its planned strategy of acquiring assets.”