After suffering a setback in court this week in its journey to acquire Elan ($ELN), Royalty Pharma regained some momentum with a revised offer for the company that could be worth $8 billion. Royalty has sought to win over investors with an offer of $13 per share and a $2.50 CVR, a jump from the previous $12.50 per share offer that the vast majority of Elan shareholders rebuffed.
In addition to boosting the initial cash offer, Royalty added the contingent value right (CRV), which is tied to sales and development milestones for the blockbuster multiple sclerosis drug Tysabri. Ireland-based Elan has blasted Royalty's previous bids for undervaluing its royalty stream on Tysabri. The CVR would reward shareholders if Tysabri lives up to some of the potential that Elan sees in the therapy, of which Biogen Idec ($BIIB) took over full control after paying Elan $3.25 billion in February.
Royalty's latest offer is also contingent on Elan shareholders rejecting a slate of proposed deals from Elan's management that have been criticized as maneuvers to thwart a takeover. At a June 17 special meeting, Elan shareholders will be asked to approve deals such as the $1 billion Elan aims to invest in Theravance's ($THRX) royalties on respiratory drugs from that company's collaboration with GlaxoSmithKline.
"$13 a share is a game changer; it's a very, very generous offer," said Guillaume van Renterghem, an analyst at UBS AG in London, told Bloomberg. "Frankly I doubt very much that shareholders will vote positively for any of the Elan management proposals."
|CEO Kelly Martin|
Elan management led by CEO Kelly Martin scored a victory in a U.S. court this week when a judge temporarily blocked Royalty's hostile bid for Elan. The court is expected to take up the issue next week and consider a preliminary injunction against Royalty, which Elan lawyers have criticized for lack of material disclosures in its proposals.
Royaly's latest bid comes after only 7.5% of Elan shareholders accepted its previous offer, Reuters reported.
"While Elan's Board and Management team appear to be solely focused on what we perceive to be increasingly desperate attempts to fend off Royalty Pharma's highly compelling offer, we have been carefully listening to shareholders and are pleased to revise our offer today based on their feedback," said Pablo Legorreta, Royalty's CEO, in a statement.