independent

Monday 21 April 2014

Shareholders in line for big pay day as Elan returns sale proceeds

Firm to share $1bn raised from disposal of MS drug Tysabri

Irish drug company Elan has pledged to return $1bn (€760m) to shareholders after disposing of its 50pc stake in multiple sclerosis drug Tysabri. The move will provide a boost to the thousands of Irish shareholders on the company's register.

Elan is set to receive $3.25bn from that sale to US firm Biogen Idec. Elan chief executive Kelly Martin unveiled the share repurchase programme yesterday as he outlined more plans for the Tysabri proceeds.

News of the buyback sent Elan shares more than 4pc higher in Dublin. In New York, they jumped nearly 7pc at the open. The company expects to be in a position to reveal a number of "strategic transactions" once the Tysabri sale closes.

Mr Martin said the company has been making "significant progress" in determining what it will do with the proceeds and said Elan was prepared "to move expeditiously, upon close, on the redeployment of capital".

Elan had already said that it was looking at how to return cash to shareholders.

Buyback

It said the buyback "enables a significant portion of the unlocked value of Tysabri to be returned to shareholders".

Elan also stressed that even after the sale of Tysabri, it retains more than $1.5bn in accumulated tax losses.

"The upfront cash payment to Elan will have little to no tax burden and part of our objective is to enable shareholders to benefit directly from that structural advantage," said the company yesterday.

Tysabri

Mr Martin said this month that at no time was a winding up of Elan considered once the Tysabri stake was sold. He insisted that Elan has a future investing in other firms.

"We have spent significant time evaluating assets around the world and establishing relationships that might ultimately lead to constructive strategic transactions," the company said.

"We are enthusiastic about the opportunities that exist and we expect to be in a position to announce a number of strategic transactions upon or following the close of the restructuring."

Elan also plans to refinance its remaining $600m debt once the Tysabri deal closes.

Deutsche Bank retains a 'hold' rating on Elan stock.

"Close to 40pc 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," said analyst Richard Parkes.

Elan will continue to receive royalties from sales of Tysabri, which reached $1.6bn last year.

In 2011, Elan sold its drug technology business to Alkermes for nearly $1bn. That deal included nearly $500m in cash and a 25pc stake in Alkermes, which Elan has already sold.

Elan hived off its cash-hungry drug development business into a new separately listed US firm called Prothena last year. It retains an 18pc stake in that firm.

Irish Independent

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