Royalty Pharma's $8B Elan bid could hinge on court decision

Royalty Pharma made another plea with shareholders of Ireland-based Elan ($ELN) to reject four proposals from Elan on Friday morning. Shareholder approval of just one proposal could derail Royalty's potential $8 billion takeover bid for the biotech company and leave Elan CEO Kelly Martin with a green light to reinvest a $3.25 billion windfall from the sale of Tysabri rights.

Elan CEO Kelly Martin

With 81% of votes counted, Royalty reports today that most of the shareholders have voted to reject Elan's $1 billion investment in Theravance ($THRX) royalties on lung drugs and a buyout of AOP. Yet only a slim majority turned down a spinoff of an Alzheimer's drug from Elan into a new company, leaving that proposal too close to call, and shareholders continue to narrowly favor a 200 million euro share buyback.

Royalty has blasted all four of those proposals as bad for investors, but now it sounds more flexible on its stance that shareholders need to reject all four items. The company wants to see its $8 billion bid, which includes $13 in cash and a $2.50 CVR, remain intact as long as shareholders turn down the Theravance and AOP deals. Irish regulators have ruled that Royalty cannot alter the terms.

As Reuters reported, Ireland's High Court is expected to meet next Wednesday to decide whether Royalty can challenge the decision that it cannot revise the terms of its offer. Irish regulators could require Royalty to wait another 12 months before it can make another bid on Elan.

Meantime, Johnson & Johnson has cashed out on the company's remaining stake in Elan for $332.5 million, Bloomberg reported. The U.S. healthcare giant ($JNJ) had acquired a $1 billion piece of Elan four years ago related to the development of the Alzheimer's drug bapineuzumab, and the sale of its shares has no bearing on Royalty's takeover bid.

Still, Elan would be in a very different position right now if not for the high-profile failure of bapi in Phase III trials last year and its decision to sell its ownership of Tysabri to Biogen Idec ($BIIB).

Royalty, which covets Elan's royalties on Tysabri sales, says that there's a shot for the €200 million ($266.36 million) share buyback plan to fail. Elan has told investors that other parties have shown interest in the company, yet only Royalty has made a bona fide bid, and analysts have warned that its current offer--which could disappear after all the votes are counted June 17--is propping up Elan's stock price.

- find Royalty's release
- check out Reuters' article
- see Bloomberg's report