Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Biogen Idec Inc. (BIIB): Elan Corporation, plc (ADR) (ELN) Likely To Receive Higher Takeout Bids

Page 1 of 2

Elan Corporation, plc (ADR) (NYSE:ELN) has been in the news over the past few months because of a hotly contested battle with Royalty Pharma.  The battle began on Feb. 25, 2013, when Royalty offered to buy Elan Corporation, plc (ADR) (NYSE:ELN) for approximately $6.6 billion in cash.  This deal would have meant that Elan shareholders would have received $11 per share.  Since that announcement, there have been a series of moves by both companies in an attempt to get what they want.  The timeline is as follows:

Elan Corporation, plc (ADR) (NYSE:ELN)

March 4, 2013:  Elan Corporation, plc (ADR) (NYSE:ELN) announces that it plans to pay a recurring special dividend to shareholders based on its Tysabri royalties. Tysabri was jointly developed with Biogen Idec Inc. (NASDAQ:BIIB) back in 2004. Since 2006, Tysabri has managed to gain traction in the marketplace.  It is considered most effective at reducing the frequency and severity of sudden immobilization and partial paralysis experienced by multiple sclerosis patients.  Last month, Biogen Idec Inc. (NASDAQ:BIIB) acquired Elan’s remaining share in Tysabri for $3.25 billion in cash and recurring royalty payments.

April 15, 2013:  Royalty Pharma announced that it had raised its bid from $11 per share to $12 per share.

May 20, 2013:  Royalty Pharma announced that it had raised its bid from $12 per share to $12.50 per share.

June 7, 2013:  Royalty Pharma announced that it had raised its bid from $12.50 per share to $13 per share plus a Contingent Value Right of up to $2.50 per share.  The CVR will be based on the future upside of Tysabri, including approval in secondary progressive multiple sclerosis and certain sales milestones.

Elan Explores Sales Options

On Monday, June 17, 2013, Elan Corporation, plc (ADR) (NYSE:ELN) announced that it would begin a formal sale process.  This was decided because of the offers and interest that the company had received up to that point.  Elan advised shareholders not to tender Royalty Pharma’s latest offer, but that it would invite Royalty to participate in the formal process.

Royalty Likely To Bid Higher

Now that Royalty is just a part of the process, it will need to start making more investor-friendly deals.  Given that its recent offer could be worth up to $15.50 per share, it is likely that Royalty will come back with at least a higher cash portion and a lower CVR.  This will appease investors and make it more likely that such a deal could garner enough shareholder support to pass.

Royalty has already increased its initial offer by $2 per share, with the potential for that to be $4.50 per share.  The reason for this is likely the hidden value in Tysabri.  As mentioned above, Biogen acquired the remaining rights to Tysabri earlier this year. Upon that announcement, Biogen announced that the deal would boost its earnings from the very first year, increasing earnings by $0.20 to $0.30 in 2013.  Biogen expects that increase to continue after 2013 as well.

The deal stipulates that Elan Corporation, plc (ADR) (NYSE:ELN) is to receive 12% of annual Tysabri sales for the first 12 months after the deal closes.  After that initial period, royalties will skyrocket to 18% of sales up to $2 billion and 25% of sales over $2 billion.  Given that sales were $1.6 billion in 2012, an increase of 8% from 2011, Elan appears to be sitting in a great spot.  Royalty likely recognizes this and wants to acquire the company while a deal still makes sense.

Biogen Could Bid

While Biogen Idec Inc. (NASDAQ:BIIB) already owns the full rights to Tysabri, the company is obligated to continue paying Elan Corporation, plc (ADR) (NYSE:ELN)’s perpetual royalty.  If Biogen believes that Tysabri sales will continue to grow at higher than expected rates, it would make sense for the company to try and acquire Elan at a price that is a discount to the royalty stream.  Over the past 4 years, Tysabri sales have shown tremendous growth:

2009 Annual Sales:  $1.06 Billion

2010 Annual Sales:  $1.20 Billion

2011 Annual Sales:  $1.50 Billion

2012 Annual Sales:  $1.60 Billion

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!