Elan investors gave the Irish medicine maker a boost in its expectations of fending off a $7.3 billion (4.7 billion pounds) bid coming from Royalty Pharma if they ignored a plea from the U.S. investment firm to tender stock at a high price at a buyback on Sunday. Royalty, which usually sweetened its provide for Elan this 7 days, urged investors to "deliver a information to the Elan board" by tendering all of their stock at $11.75 or $12 to fully profit from its $12 per share offer. However Elan said only 4 percent of shares were tendered at Royalty's preferred mark and that it bought back the targeted $1 billion of stock at the bottom of the $11.25 to $13 range, with U.S. drug maker Johnson & Johnson accounting for 92.3 percent of all shares purchased. The results of the tender offer appear to indicate that Elan shareholders either believe that Elan CEO Kelly Martin can rebuild the company through acquisitions or that Royalty Pharma will come back with a higher bid, analysts said. "It's a strong message that the shareholder base of Elan is not thinking about tendering at the $13 level," said Adrian Howd, an analyst at Berenberg Bank. It might also be good news for Elan that Johnson & Johnson (J&J), which never appeared to be a strategic investor in Elan, has reduced its stake in Elan from 18 percent to 4.9 percent and tendered all its shares, Howd said. J&J, which said it will make a $213 million gain from the sale, paid $1 billion for its holding in 2009 in a deal that gave both drug makers a 25 percent share in bapineuzumab, an experimental Alzheimer's treatment that failed last year. "It means that the shareholder base is now more supportive in that the sense that you have more shareholders that care about the shares being above $13 a share," Howd said. The strike price of $11.25, which retires 14.8 percent of the current shares in issue, means that according to details published by Royalty on Monday, its bid is now pushed back to $11.25, including a net cash right worth up to $1.00. The New York-based company, targeting royalty rights for multiple sclerosis (MS) treatment Tysabri worth hundreds of millions of dollars annually, made the offer ahead of a May 10 deadline to make a firm bid. Elan, which rejected Royalty's initial offer of $11 per share for being "highly conditional", plans to reinvent itself through a series of acquisitions after selling its 50 percent interest in Tysabri for $3. The Dublin-based company, left with just one experimental drug in its pipeline following the Tysabri deal, improved the terms of its own plan last month by offering shareholders up to 20 percent of future royalties from the blockbuster MS drug. However whether Elan's shareholder will be accurate on their bet not to tender at $13 a share remains to be viewed. Several experts agree with Royalty's evaluation that Elan's management has small track record in creating large acquisitions. "I do not understand why investors would not sell out at that level," mentioned Nick Turner, an expert at Mirabaud Securities. "Whether or not they think they can easily get a better returning out of Elan under present management... that is not an discussion that holds water with me." |
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