United States investment firm Royalty Pharma has made a $6.6bn approach to Irish drugmaker Elan, targeting royalty rights for multiple sclerosis treatment Tysabri worth hundreds of millions of dollars annually.
Elan said earlier this month it was to sell its 50 per cent interest in Tysabri for $3.25bn plus future royalty payments to US partner Biogen Idec, and then reinvent itself with a series of acquisitions.
Reuters reports that those royalty payments on future Tysabri sales, which rose by eight per cent to $1.63bn in 2012, will be 12 per cent for the first year and 18 per cent thereafter.
Royalty Pharma, which buys royalty streams of patented drugs and whose was indicative approach was worth $11 per Elan share, said on Monday that after the Biogen Idec deal, Elan would have two material assets – cash and the Tysabri royalty payments.
“The risks and lack of earnings visibility associated with Elan’s acquisition and in-licensing strategy (are) substantial,” it said. Elan shares were up by 6.5 per cent at $11.29 by 11.30 a.m. ET.
Royalty Pharma said Elan shareholders would be able to invest cash paid for their Elan Stock in other drug companies without paying a premium to gain control, as would likely be the case were Elan itself to buy a controlling stake in a company.
Elan, in which US group Johnson & Johnson is an 18 per cent shareholder, said Royalty Pharma’s proposed bid was highly opportunistic because shareholders had not had the opportunity to assess the full benefit of the Tysabri sale.