Shareholders of Irish drug maker Elan approve $1 bn buyback

Shareholders of Irish drugmaker Elan Corp yesterday approved the company's plan to buy back $1 billion of stock following the sale of its largest drug, as the company tries to ward off a $6.6-billion unsolicited takeover bid from Royalty Pharma.

The Dublin-based drug maker yesterday said that the buyback, priced between $11.25 and $13.00 per share, was backed by 99.2 per cent of its shareholders.

The neuroscience-focused biotechnology company is facing a hostile takeover from Royalty Pharma, a New York-based investment firm that buys royalty streams of patented drugs, which has last week been told by the Irish Takeover Panel to make a formal offer by 10 May or walk away.

Elan shareholders have to decide whether to accept Royalty Pharma's $11 per share offer or be content on getting royalty from future Tysabri multiple sclerosis drug sales and trust the company's management to use its cash reserves for making revenue earning acquisitions.

Royalty Pharma, which holds rights to 37 approved and marketed pharmaceutical products, including Johnson & Johnson's Remicade, Merck's Januvia, Sloan-Kettering Cancer Center's US royalty interest in Amgen's Neupogen drug and Gilead's Atripla, had, on 26 February, launched a hostile bid for Elan after it failed to get a response from their company's management to its informal offer made on 18 February.

The offer was at a mere 4-per cent premium to Elan's closing price on 25 February on the New York Stock Exchange.

The hostile bid came just three weeks after Elan sold its 50 per cent stake in Tysabri to its US partner Biogen Idec for $3.25 billion plus multi-tiered future royalties on sales of the drug. (See: Biogen Idec to pay Elan Corp $3.25 bn plus for full rights of multiple sclerosis drug Tysabri)

Under the royalties plan, Elan will receive from Biogen Idec 12 per cent of sales for the first 12 months and after that, 18 per cent on sales up to $2 billion and 25 per cent on sales of more than $2 billion.

Elan, whose share price closed yesterday at $12, had rejected Royalty Pharma's bid as too low and conditional and instead offered to share part of Tysabri's proceeds with shareholders through a proposed share buyback worth $1 billion and also pay two dividends annually from the royalties to be received from the deal.

This week several media reported that Royalty Pharma is considering to sweeten its offer by raising its bid price as well as offering a contingent value right, called CVR, which, post acquisition, can be traded by Elan's shareholders like any other securities and could fetch more if Tysabri passes the milestones.