Theravance will receive $10 million dollars next week by terminating the agreement with Elan...
Termination of Material Definitive Agreement.
On June 21, 2013, Theravance, Inc. (“Theravance”) delivered written notice to Elan Corporation plc (“Elan”) terminating the Royalty Participation Agreement between Elan and Theravance dated May 12, 2013 (the “Agreement”). The Agreement provided for Elan to pay Theravance $1.0 billion to purchase a 21% participation interest in certain potential future royalty payments when, as and if received by Theravance. Under the Agreement, the closing of the transaction was subject to closing conditions, including the approval of the transaction by Elan’s shareholders. Following the failure of Elan’s shareholders to approve the transaction at an Extraordinary General Meeting, the Agreement provided that either Theravance or Elan may terminate the Agreement. Upon Theravance’s termination of the Agreement, Elan became obligated under the Agreement to pay Theravance $10 million within two business days of the termination.
Yes I do think that Theravance initiated the termination because they have been informed by GSK any offer they received they will match. The takeover is very accretive to GSK. This is a $30 billion market and the 5 or 6 billion they pay for THRX will be recovered within 2 years. This is because Glaxo already owns a quarter of Theravance and they know the FDA approval for the rest of the formulations is not a mystery, they are not dealing with an unknown product here but a reformulation, double or triple dosage. The person who said Elan will wait to pay is wrong , Elan must pay within 2 days and that means next week Theravance will have their $10 million check..
Combine this news with the FDA approval and Theravance easily gets to $40 + Monday. If the GSK speculation gains more traction THRX will continue to go higher. The point to remember is that Wall street insiders have access to more information than the average person, they are aware of industry speculation before the actual news hits the wires. I remember the Heinz takeover by Warren Buffet, there was major call buying before the news and the buyers were charged with insider knowledge..
Looking at the out of the money options activity going out to Jan 2014 you have 361 options purchased representing around $1.4 million. Watch these numbers begin to rise over the next week or so for clues to the stock price