While Elan is in the process of selling its fifty percent share in the successful multiple scelerosis drug Tysabri with its US partner Biogen Idec, here comes American investment firm Royalty Pharma offering US6.6 billion for Tysabri. Central to the deal is the royalty payments for the drug itself estimated to be at hundreds of millions of dollars per year.
Under the Biogen deal, Elan is to receive twelve percent on the first year and eighteen percent for the years thereafter. The royalty payments for 2012 were pegged at 8% and would be estimated to be at US$1.63 billion.
Royalty Pharma, whose core business is the purchase of royalty streams from patented drugs, has approached Elan at US$11 per share for the two major assets of Elan, cash and the Tysabri royalties. Under the proposed deal Elan shareholders would be able to invest cash paid for their stock holdings in other drug companies without the additional premium to gain control. This is the most likely scenario as Elan would be purchasing a controlling stake in the company, in line with the initial objectives in the Biogen deal.
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