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Royalty Pharma raises Elan bid to $6.4bn

22 May 2013

pharma_lrgPrivate equity firm Royalty Pharma has increased its offer for Elan to $12.50 per share and said the board has failed shareholders in the recent acquisition of Theravance.

The previous $11.25 per share offer was turned down by the Irish drug company’s board as “wholly inadequate”. Elan said it failed to “properly value the high margin cash flow” generated by its multiple sclerosis drug Tsyabri.

Elan chairman Robert Ingram pointed out that the offer of $11.25 per share includes a “poorly defined” $1m contingency payment that may not ultimately be paid.

Royalty noted that the new $6.4bn offer is equivalent to a $4.6bn value for Elan’s Tysabri royalty, a premium of 42 per cent to the $3.25bn at which Elan sold around half of its interested in the drug to Biogen.

Last week Elan bought a 21 per cent stake in future royalties on four drugs jointly developed by biopharmaceutical company Theravance and GlaxoSmithKline, which was seen as an attempt to fend off Roualty’s bid.

In its latest offer, Royalty said the company’s board substantially overpaid for the asset and failed to negotiate a fiduciary out close.

In addition, Elan yesterday announced the acquisitions of Austrian company AOP Orphan Pharmaceuticals and a 48 per cent interest in Dubai-based business NewBridge Pharmaceuticals for $40m.

Royal said it would withdraw the offer if the deals are approved by Elan’s shareholders.

“If the Theravance transaction and the other transactions announced today serve as a template for future transactions, Royalty Pharma believes Elan stockholders should be very concerned about future value destruction and undue risk-taking by Elan,” Royalty said in a statement.

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