Elan Explores Sale Options

Zacks

In light of the offers and interests received so far, Elan Corporation, plc (ELN) recently announced that it is gearing up for a formal sale process. Elan share prices shot up significantly following the announcement.

Elan also advised its shareholders not to tender Royalty Pharma’s latest offer of $13.00 per share in cash, along with a contingent value right (CVR) of up to $2.50 per share. However, Elan stated in its press release that it will invite Royalty Pharma to participate in the sale process.

We remind investors that not so long ago the Board of Directors of Elan rejected Royalty Pharma’s latest offer to acquire all its shares stating that the offer of $13 plus an up to $2.50 CVR substantially undervalued the company. The previous three offers of $12.50 per share, $11.25 per share and $11.00 per share were duly rejected.

Meanwhile, Elan’s shareholders rejected the majority of the company’s proposed strategic transactions at the Extraordinary General Meeting (:EGM). The shareholders turned down the proposed acquisition of AOP Orphan Pharmaceuticals and the Theravance Inc. (THRX) transaction. Moreover, the proposed divestment of the company’s pipeline candidate ELND005 (agitation/aggression in Alzheimer’s disease and Downs Syndrome) was also rejected.

However, the shareholders approved the company’s proposed $200 million share repurchase program.

We remind investors that in Apr 2013 Elan sold its Tysabri stake to Biogen Idec Inc. (BIIB). Elan currently receives royalty payments at 12% on worldwide net sales of the multiple sclerosis drug. After the first year, Elan is expected to receive a royalty of 18% on up to $2 billion of global net sales of Tysabri and 25% thereafter on over $2 billion of global net sales of Tysabri.

Elan presently carries a Zacks Rank #2 (Buy). However, Jazz Pharmaceuticals Public Limited Company (JAZZ) currently looks better positioned with a Zacks Rank #1 (Strong Buy).

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