What’s Next for Elan Corporation, plc (ADR) (ELN)?

Elan Corporation, plc (ADR) (NYSE:ELN)’s board unanimously rebuffed a $6.7 billion takeover offer from Royalty Pharma in early June and hired Citigroup Inc. (NYSE:C) to review “several corporate inquiries.” Things are starting to get very interesting.

“Both the board and executive management are aligned in exploring all opportunities that maximize the full value of the company for its shareholders,” Elan said in a statement. Apparently, it believes the company is worth much more than Royalty was offering.

Royalty Pharma, an investor in royalty streams from pharmaceuticals, boosted its bid to buy Ireland based Elan Corporation, plc (ADR) (NYSE:ELN) by 5% in a second attempt to take over the new streamlined, cash flush biotechnology company.

Royalty Pharma recently offered $13 per share in cash, up from its original $12.50. It also included a contingent value right of $2.50 a share if sales of Tysabri, a blockbuster multiple sclerosis drug, met certain set targets.

“Royalty Pharma’s revised offer continues to grossly undervalue Tysabri,” Elan’s board maintained in a statement

Biogen Idec Inc. (NASDAQ:BIIB)’s Tysabri Ties

The saga began back in April when Elan Corporation, plc (ADR) (NYSE:ELN) closed a deal to transfer 100% of the marketing and distribution rights of Tysabri to Biogen Idec Inc. (NASDAQ:BIIB). Under the agreement, Elan received $3.25 billion in cash and double digit tiered royalty payments for future sales of the MS drug.

Over the first twelve months following the deal, Elan gets 12% in royalties on sales of Tysabri. Then, Elan will receive 18% in royalties up to $2 billion, and 25% in royalties when sales surpass $2 billion. Last year, Tysabri sales were $1.6 billion.

Biogen has two other notable MS treatments. Just launched this year, Tecfidera sales are already beating lofty expectations. Sales are expected to hit $800 million this year, nearly double what analysts had expected.

Some analysts had worried that Tecfidera (available in pill form) would chip away at another Biogen MS drug, Avonex. Yet that hasn’t been the case. But, Tecfidera is taking market share away from competitor Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) MS drug Copaxone.

The Elan/Tysabri deal bolsters and anchors Biogen’s MS business. Sales of the blockbuster drug, administered by injection and used to treat people with relapsing- remitting forms of MS, rose 8% in 2012. And, Biogen is seeking approval to sell Tysabri as a first-line treatment for the debilitating neurological disease, which could further drive sales.