Royalty Pharma in $6.6bn Elan approach

US investment firm Royalty Pharma has made a $6.6 billion approach to Irish drugmaker Elan, targeting royalty rights for multiple sclerosis treatment Tysabri worth hundreds of millions of dollars annually.

Elan said earlier this month it was to sell its 50% interest in Tysabri for $3.25bn plus future royalty payments to US partner Biogen Idec, then reinvent itself with a series of acquisitions.

Those payments on future Tysabri sales, which rose 8% to $1.63bn in 2012, will be 12% for the first year and 18% thereafter.

Royalty Pharma, which buys royalty streams of patented drugs and whose was indicative approach was worth $11 per Elan share, said that after the Biogen Idec deal, Elan would have two material assets – cash and the Tysabri royalty payments.

“The risks and lack of earnings visibility associated with Elan’s acquisition and in-licensing strategy (are) substantial,” it said.

Royalty Pharma said Elan shareholders would be able to invest cash paid for their Elan Stock in other drug companies without paying a premium to gain control, as would likely be the case were Elan itself to buy a controlling stake in a company.

Elan said Royalty Pharma’s proposed bid was opportunistic because shareholders had not had the opportunity to assess the full benefit of the Tysabri sale.

Deutsche Bankanalyst Richard Parkes said the small premium suggested might deter Elan’s shareholders.