Royalty ups Elan bid to $6.4bn after buying spree
Takeover battle on again despite Irish drug-maker's €350m spend
US drug firm Royalty Pharma has boosted its offer for Elan to nearly $6.4bn (€5bn) after the Irish firm unveiled a raft of acquisitions.
The raised bid of $12.50 per Elan share – up from $11.25 previously – reignites a takeover battle that seemed to be swaying in favour of Elan management, who've urged shareholders to reject the bid.
Elan chief executive Kelly Martin (below) yesterday revealed that the company was splurging an initial €349m, which includes the purchase of an Austrian firm and a stake in a Dubai-based drug company, as management forge ahead with plans to rebuild the group's strategy.
It has also announced a $200m (€155m) share buyback plan and will issue $800m (€622m) in fresh debt.
The Irish pharmaceutical group has agreed to pay an initial €263.5m to buy Austria-based AOP Orphan, a company that is developing drugs aimed at tacking rare diseases.
Elan will also pay as much as an additional €270m to AOP's existing shareholders contingent on certain late-stage clinical programmes being advanced.
The Irish firm has also agreed to pay $40m (€31m) for a 48pc stake in Dubai-based Newbridge Pharmaceuticals, a start-up company whose shareholders also include the state-owned Kuwait Life Sciences Company.
It's focused on the sale and marketing of drugs for treating ailments that are prevalent in the Middle East, Africa, Turkey and the Caspian region.
Elan has an option to take full control of Newbridge by 2015, subject to the payment of an additional $244m (€189.6m).
Mr Martin said the transactions are designed to produce "long-term growth in income and value" for the Irish group.
The acquisitions – which have to be approved by shareholders – come hot on the heels of a decision announced last week by Elan to spend $1bn (€777m) to buy a 21pc stake in the royalties that US firm Theravance receives from drug giant GlaxoSmithKline for its respiratory drugs.
Royalty claimed yesterday that Elan "dramatically overpaid" for that stake and pursued the acquisition "in haste".
The spending spree by Elan is being funded by the $3.25bn (€2.5bn) it recently received from the sale of its 50pc stake in multiple sclerosis treatment Tysabri. That sale left Elan with virtually no drug assets and also prompted the takeover plot by Royalty.
Elan management insist that they can effectively transform the company's strategy following the Tysabri sale. It will continue to receive royalties from Tysabri sales.
The company is also spinning off its remaining drug molecule, ELND005, into an Irish company to be called Speranza Therapeutics. It will be headed by Elan's chief medical officer, Menghis Bairu.
Elan has an 18pc stake in Speranza in return for making an initial $70 (€54m) equity injection. A third-party backer is committing $20m (€31.1m) for a 62pc stake.
Elan has already used $1bn (€777m) of the Tysabri proceeds to undertake a share buyback. Most of those funds went to Johnson & Johnson, which sold the bulk of its stake in Elan.
Following the latest acquisitions and latest $200m share buyback, the company will still have $1.2bn (€932m) in cash.