) recently provided a brief update on its cash position and
multiple sclerosis drug Tysabri's value to its shareholders and
the market at large.
Elan stated in its press release that the underlying value of
Tysabri is $11.85 per share with an upside potential of $17.15
per share. The company has set its cash value at $3.65 per share.
As a result, the total aggregate value of Tysabri, before the
deduction of operating expenses along with cash was in the range
of $15.50 - $20.80 per share.
Royalty Pharma's latest bid of $12.50 per share thus
undervalues these assets by up to $4.3 billion. Elan also
believes that its shareholders will be deprived of billions of
dollars of present value if they tender Elan's shares at
We remind investors that Elan's Board of Directors recently
rejected Royalty Pharma's offer for the third time. Last week,
Royalty Pharma raised its offer to acquire all shares of Elan to
$12.50 per share from $11.25 per share earlier. Royalty Pharma's
previous two previous offers of $11.00 per share and $11.25 per
share were also rejected by Elan's Board.
Elan also mentioned in its press release that Tysabri is
expected to generate cash flows for more than a decade. The
drug's clinical and product characteristics help to minimize
Moreover, revenue growth of Tysabri was 19% on a compounded
basis in the period 2008-2012 and is expected to grow at a CAGR
of 11-16% in the period 2012-2016. At this growth rate the
royalties from the drug will come to around $484−$611 million by
2016. The royalties will be shared with Elan's shareholders
through a 20% dividend.
We remind investors that Elan sold its Tysabri stake to
) in Apr 2013. As per the terms of the transaction Biogen made an
upfront payment of $3.25 billion to Elan. Elan is also eligible
to receive a royalty payment of 12% on worldwide net sales of
Tysabri (for all indications) for the first year. After the first
year, Elan will receive a royalty of 18% on up to $2 billion of
global net sales of Tysabri and 25% thereafter.
Meanwhile, Elan has also announced strategic initiatives going
forward. Elan has planned a couple of acquisitions in addition to
the divestment of its pipeline candidate ELND005
(agitation/aggression in Alzheimer's disease and Downs
The company also intends to initiate a cash repurchase program
among other transactions. However, these transactions will only
go through upon approval from Elan's shareholders after the
company's Extraordinary General Meeting on Jun 17, 2013. The
company believes that these initiatives will help to diversify
its business and reduce risk.
Elan presently carries a Zacks Rank #2 (Buy).
Jazz Pharmaceuticals Public Limited Company
) currently looks better positioned with a Zacks Rank #1 (Strong
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