Biotech M&A buzz: Forest, others weigh offers for Elan

Fresh from making a deal with activist investor Carl Icahn, Forest Laboratories ($FRX) has been thrust into the mix of potential bidders for the Ireland-based biotech company Elan ($ELN). Unnamed sources told Reuters that the U.S. drugmaker was among the parties interested in bidding on Elan, and Forest apparently fits the profile of a mid-sized pharma company that could benefit from the tax advantage of acquiring a company based in Ireland.

Industry watchers have been speculating about potential bidders for Elan after the company launched a sales process last week in an eleventh-hour move to thwart a hostile takeover from Royalty Pharma, which was also invited to enter the process presumably with a better offer than its potential $8 billion bid. Royalty dropped its hostile bid this week after four months of pursuing a buyout of Elan for the spoils of its Tysabri royalties.

During its campaign to oust Royalty's takeover bid, Elan told investors that the company had received inquiries from interested parties, but no offers other than Royalty's series of overtures have materialized. Royalty's now defunct offer included $13 per share and a $2.50 CVR tied to Tysabri milestones, worth up to $8 billion. Yet Elan management led by Kelly Martin have held out for a higher offer.

Earlier this week Jeffries & Co. raised its price target on Elan shares from $14 to $19 per share, talking up the potential for larger buyout offers. The firm listed 7 potential pharma bidders, including Regeneron ($REGN), Vertex ($VRTX) and Allergan ($AGN), which could save a bundle from a purchase of Elan and having headquarters in Ireland, where the corporate tax rate is a low 12.5%. Jefferies & Co.'s list did not include Forest.

"The benefit (of becoming an Irish company) is that all future products, ones not yet approved, could be owned in Ireland and have a lower tax rate," Jefferies & Co. analyst Corey Davis told the news service.

Forest has recently struck a deal with Icahn, agreeing to place one of the billionaire investor's representatives on the company's board, avoiding another proxy battle at a challenging time for the company. Long-time Forest CEO Howard Solomon plans to retire at the end of this year, and Forest's business is still reeling from losing patent exclusivity on Lexapro.

A buyout of Elan could shave millions off of Forest's future tax bill and provide a new source of revenue from royalties on Tysabri, but the acquisition would require a sizable upfront investment.

- check out Reuters' article