Investors snub Elan deals, but buyback win could scuttle hostile offer

Elan's ($ELN) shareholders rejected a string of CEO Kelly Martin's deals today but did green-light a share repurchase pact--which the biotech says will put the hex on Royalty Pharma's hostile $8 billion offer for the company. The hostile bid, though, was already being reconsidered at the end of last week, when Elan's board decided to formally put the company on the auction block, inviting Royalty to take a seat at the bidding table.

Elan CEO Kelly Martin

In a snub for Martin, Elan shareholders rejected his deal to pay $1 billion for a sliver of Theravance's ($THRX) royalty stream from its COPD portfolio--a package questioned by some analysts as far too generous. And investors rebuked Elan's AOP buyout as well as the spinout of ELND005 into a new company. 

About a month ago Martin announced that he had acquired Vienna-based AOP Orphan Pharmaceuticals, agreeing to pay up to $693 million for the biotech. That pact was part of a series of deals struck after Elan landed a $3.25 billion windfall from the sale of its rights to Tysabri. Elan also opted to spin out its mid-stage neuropsychiatry drug ELND005--which has a lead indication for aggression among Alzheimer's patients--into a new company dubbed Speranza Therapeutics. 

Late last week Elan and Royalty were scrambling to lobby shareholders for their respective positions. But as it became more and more clear that investors would endorse the repurchase plan while rejecting everything else, Royalty began to change its position on the vote. Where it once insisted that all four of Elan's moves would have to be rejected or its bid would be voided, the group said it would no longer require a clean sweep, making the vote conditional on its individual merits. The parties were headed to Ireland's High Court on Wednesday to argue over whether the bid would become null and void, but that may not change anything now that Elan has invited bids.

Royalty had sweetened its offer to buy Elan, offering to pay $13 a share in cash with another $2,50 CVR plan. It's hard to say now just how this will play out. Elan's management insisted that it had received some inquiries from interested bidders, a common enough ploy for any company looking to get the most from any bidder. The question now is whether Royalty will remain the only interested buyer, or whether Elan can get a bidding war started.

- here's the press release from Elan