Royalty made its formal cash offer worth up to $7.3bn (€5.59bn), or $12 a share, ahead of a May 10 deadline for a firm bid, improving on an initial approach worth $11 per share that was rejected by Elan in February for being “highly conditional”.
The New York-based company, targeting royalty rights for multiple sclerosis (MS) treatment Tysabri worth hundreds of millions of dollars annually, said the offer may fall below $12, depending on Elan’s pricing of a share buyback this week.
Elan wants to reinvent itself through a series of acquisitions and reward shareholders with cash after selling its 50% interest in Tysabri for $3.25bn plus future royalties to US partner Biogen Idec. The company, in which US group Johnson& Johnson holds an 18% stake, secured strong approval from shareholders last week for the $1bn buyback, priced at between $11.25 and $13 a share.
However, Elan has little track record in making acquisitions and Royalty has questioned its ability to pull off such a plan.
Elan’s share price, hit hard last year when its main experimental drug hope failed, rose by almost 10% to $10.30 after it unveiled its disposal plan but has been pushed 16% higher by Royalty’s offer.
Royalty urged shareholders, many of whom it has met in recent weeks, to pressure Elan’s board to accept its bid. “I think it’s a good start,” said Elan investor Matt Strobeck, a former partner at Boston-based Westfield Capital Management Co, who met with Royalty Pharma executives in March.
Elan said it would give consideration to any formal proposal by any party for Elan.