In a letter to shareholders, chairman Robert Ingram said the offer – which was rejected unanimously by the board – “fails to properly value the high margin cash flow” generated by its multiple sclerosis drug Tsyabri.
Ingram said, “Given the unique regulatory construct around both the marketing and medical education and the efficacy and safety dynamics for patients, it is our view that the Tysabri asset will exist far beyond its patent life, thus further increasing, potentially dramatically, the embedded cash flow value of the asset.”
He also pointed out that the offer of $11.25 per share includes a “poorly defined” $1m contingency payment that may not ultimately be paid.
“Your board believes the Royalty Pharma offer grossly undervalues the company’s current cash flow, business and financial platform and future business opportunities,” added Ingram.
“The Royalty Pharma offer is simply not in the tactical or strategic interests of Elan’s shareholders.
“Consequently, your board strongly and unequivocally recommends that you take no action with regard to the Royalty Pharma offer.”
Earlier this week Elan bought a 21 per cent stake in future royalties on four drugs jointly developed by biopharmaceutical company Theravance and GlaxoSmithKline. The deal was seen as an attempt to fend off Royalty Pharma’s bid as it may not be interested in the Theravance assets.
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