Elan set to return $1bn to shareholders after sale of Tysabri stake

Elan is set to return $1bn (€760m) to shareholders — roughly a third of the money it is due to receive from selling its stake in multiple sclerosis drug Tysabri.

Earlier this month, the Dublin-headquartered biotechnology company announced it was selling its 50% stake in the drug to its co-partner, US pharmaceutical firm, Biogen Idec, for an initial $3.25bn and additional future royalty payments.

Yesterday, Elan updated its plans for the total windfall saying it will use it to invest in a number of new assets, pay down debt and — perhaps most notably, at this juncture — launch a $1bn share buyback programme upon completion of the Tysabri deal.

Elan’s management said that the latter move enables “a significant portion of the unlocked value of Tysabri to be returned to shareholders, directly”.

“We greatly value our shareholder relationships and the access to equity capital these relationships give us, and we appreciate the time horizon of many of our long-term holders.

“We will continue to work on ways to unlock incremental value to their direct benefit,” the company added.

“By unlocking a portion of the Tysabri asset value while retaining a significant earnings’ upside we have a unique opportunity to reward shareholders, diversify our business and create a highly distinctive business platform, upon which to advance to the benefit of shareholders and patients around the world,” chief executive Kelly Martin added.

Elan also said it will refinance its outstanding debt, once the deal has closed sometime during the second quarter of this year, while a portion of the $3.25bn will be invested into a variety of business assets. It said it is enthusiastic about opportunities that exist and expects to announce a number of strategic transactions upon or following the close of the Tysabri deal.

Elan’s share price rose nearly 7% in early trading yesterday — eventually closing at €7.97, or 4.18% up — but some analyst reaction was guarded.

Richard Parkes, an analyst with Deutsche Bank in London, said more clarity on Elan’s investment plans is still needed.

He said: “We welcome the announced share buyback and see potential for significant value to be unlocked for existing shareholders as management executes. However, close to 40% of Elan’s current market cap could be invested in as yet unknown assets and, as such, we are unlikely to gain the visibility needed to become constructive on the shares until transactions are concluded.”