Elan shares jump on news of sale process for the biotech

Elan opened the door for Royalty Pharma and others to buy the Irish drugmaker, announcing this morning that the company has begun a formal sales process. And after rejecting repeated buyout offers from Royalty for four months, Elan says that the U.S. firm will be invited to the bargaining table.

Elan ($ELN) has made the announcement at the eleventh hour of a shareholder vote on four of the company's defensive deals to thwart Royalty's hostile takeover, including a $1 billion investment in Theravance's ($THRX) royalties on lung drugs and an acquisition of AOP, among other things. After counting more than 80% of the votes, Royalty said this morning, a clear majority were against the Theravance and AOP deals.

With those key deals all but shot down by shareholders, Elan is seeking a new way forward that could result in Royalty prevailing in its three-month long campaign to acquire the biotech company and its royalty stream on sales of Biogen Idec's ($BIIB) blockbuster MS therapy Tysabri. However, Royalty's current bid faces a likely withdrawal if shareholders approve just one of the four proposals up for vote.

Shares of Elan jumped 8.64% to $13.70 this morning on news of the sales process, which also follows a statement from Elan that other parties have shown an interest in the company. Elan reiterated its stance that shareholders should reject Royalty's latest hostile bid, which includes $13 per share in cash and a $2.50 CVR linked with Tysabri milestones.

"As previously stated," the company said, "the Elan Board and management are aligned in maximizing the full value potential of the business on behalf of its shareholders. We will update the market as appropriate."

"The only thing that is certain for Elan shareholders is Royalty Pharma's cash-confirmed offer for $13 per share plus a $2.50 CVR. If shareholders want to have the option to choose between Royalty Pharma's offer or a sale process, they should vote against all four of Elan's proposals, especially the Share Repurchase Program," Royalty said in an emailed statement. 

Presumably, Elan expects that it can fetch a better deal than the latest $8 billion offer from Royalty. With Elan striking a series of defensive pacts in recent months, Royalty has made its offer contingent on shareholders rejecting all four proposals up for vote this week. Based on early counts, shareholders have narrowly favored a €200 million ($266.36 million) share buyback proposal, and Royalty has pushed for shareholders to reject that and the three other items to ensure that its offer remains in force. 

As reported earlier, Royalty has sought legal remedies to revise its terms so that shareholders need only to reject the Theravance and AOP deals to keep the option of taking its offer. Yet Irish regulators shot down its request. Royalty is appealing that decision with the country's High Court next week.

- here's Elan's statement
- see Reuters' update

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