Royalty Pharma, whose $6.7 billion takeover bid for Elan Corp. (ELN) lapsed this month, is holding internal discussions about making a new bid for the company with a partner, according to four people with knowledge of the situation.
Royalty would need permission for a joint bid from Elan, which formally put itself up for sale on June 14, since the target company has required prospective buyers to bid alone, said one of the people, who asked not to be identified because the matter is private. Elan invited Royalty to participate in an auction of the company.
Royalty isn’t permitted to talk to potential joint bidders until it has entered Elan’s auction, a person familiar with the matter said. Since Elan won’t currently allow joint bids, Royalty needs to first negotiate new terms with the Irish company that would allow it to make a dual bid, the person said. Royalty plans to approach Elan to discuss how to enter the auction, the person said.
Partnering would be a twist in Royalty’s attempt to gain access to royalties on the multiple sclerosis drug Tysabri after it spent four months trying to acquire Elan, beginning with an unsolicited offer in February. Royalty’s offer lapsed on June 17. Elan gets royalties from Biogen Idec Inc. (BIIB:US), which markets the drug.
Elan’s New York-traded depositary receipts rose as much as 6 percent on the news and were up more than 1 percent to $14.13 at 2:01 p.m.
Royalty is among firms that buy access to the income streams from existing drugs amid a dearth of new blockbuster medicines. Chief Executive Officer Pablo Legorreta pioneered the business when he founded Royalty in 1996, targeting drugs for critical care and life-threatening illnesses.
If Royalty can place a joint bid, it would keep the Tysabri royalties while its partner could take advantage of Elan’s corporate shell, which would allow a buyer to benefit from Ireland’s lower tax rates, the people said. Irish corporate income taxes are levied at a rate of 12.5 percent, which has drawn companies including Google Inc. to set up large operations in the country.
Potential bidders for Elan include Allergan Inc., Regeneron Pharmaceuticals Inc., Vertex Pharmaceuticals Inc. (VRTX:US), Alexion Pharmaceuticals Inc., Zoetis Inc., Mylan Inc. and Perrigo Co., Jefferies LLC analyst Corey Davis said in a note to investors on June 18.
A representative for Elan declined to comment on the sale process, as did a spokeswoman for Royalty Pharma.
Tysabri is an intravenous infusion discovered by Elan for multiple sclerosis. Biogen agreed to buy Elan’s stake in the drug for $3.25 billion in cash plus future royalties on Feb. 6. Sales of the drug may reach $2.03 billion by 2016, according to the average of 12 analyst estimates (BIIB:US) compiled by Bloomberg.
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