Royalty ups its bid for Elan

Royalty Pharma has raised its offer to buy Elan after the Irish drug maker announced several acquisitions to boost revenue and resist the bid.

The all-cash offer of $12.50 per American depositary receipt is higher than a previous bid of $11.25 of the receipts.

Elan’s US shares were up 3.3% to $12.06 in New York yesterday afternoon. The offer values the company at $6.4bn (€4.96bn).

Elan’s board unanimously rejected the previous takeover bid on Apr 22.

An acquisition would allow Elan shareholders to avoid the risks of chief executive Kelly Martin’s strategy of reinvesting the $3.25bn Elan received from Biogen Idec for divesting its stake in the multiple sclerosis drug Tysabri, Royalty has said.

Elan this month announced a $1bn investment in Theravance’s royalties, a $340m takeover of Vienna-based AOP Orphan Pharmaceuticals and the purchase of a 48% stake in Dubai-based NewBridge Pharmaceuticals for $40m.

Elan has “dramatically overpaid” in the Theravance deal by agreeing to spend $1bn on 21% of a portion of royalties when all of Theravance was trading at $3.5bn, Royalty said. Yesterday’s increased offer is contingent on Elan investors voting against the Theravance transaction and all deals announced yesterday that are put to a vote, Royalty said.

In addition, Elan’s board can’t recommend Royalty Pharma’s offer at any price without breaching its agreement with Theravance, thereby compromising its ability to freely advise its shareholders and making itself “irrelevant” to them, Royalty said.

Elan’s board will assess Royalty’s announcement and advise shareholders, the company said yesterday in a statement.

“In the meantime, Elan shareholders are strongly advised to take no action in relation to the Royalty Pharma offer.”