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Elan lines up biotech deals as it preps for $3B Tysabri windfall

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Elan CEO Kelly Martin

Dublin-based Elan ($ELN) has told investors how it plans to play the first two rounds in a $3.25 billion game set up by the sale of Tysabri. In a statement this morning the biotech company said it will use the first $1 billion in a share buyback aimed at returning some of the money to investors. And once the deal closes, Elan CEO Kelly Martin says that he's ready to start doing deals and buying assets on day one.

"From a portfolio point of view, these assets will, characteristically, diversify Elan from a product, science/clinical, therapeutic, and geographic point of view," the company said in its statement. "As mentioned previously, in anticipation of agreeing to the Tysabri restructuring, we have spent significant time evaluating assets around the world and establishing relationships that might ultimately lead to constructive strategic transactions. We are pleased with our progress along these lines. 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 Tysabri restructuring."

Martin also said that the company would use its windfall to help restructure the company's debt as it sets the stage for the next chapter. In addition to the $3.25 billion in cash, which will largely be untouched by taxes, Elan also has a double-digit royalty stream from Tysabri--which earned $1.6 billion--to play with as well.

Curiously, Martin has been purposefully vague about his deal plans, refusing to specify exactly what he has his eye on or how the company will look once he's finished. 

"Close to 40 percent of Elan's current market cap could be invested in as yet unknown assets ... we are unlikely to gain the visibility needed to become constructive on the shares until transactions are concluded," Deutsche Bank analyst Richard Parkes noted, according to Reuters.

Elan is largely an empty vessel right now. It sold its drug technologies unit to Alkermes ($ALKS) in 2011, then spun off most of its early-stage research work. Tysabri was about all it had left after bapineuzumab failed in Phase III. Handing that money to Martin, who has earned blistering reviews for his performance over the years, took a number of analysts by surprise. 

- here's the press release
- see the Reuters story

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