Pressure on Elan to open books after improved Royalty bid

Royalty Pharma’s sweetened bid for Irish drugmaker Elan heaps pressure on Elan’s management to open its books to the US investment firm in the hope of a better offer, analysts and shareholders said yesterday.

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.

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