Elan Corporation plc
) Board of Directors recently approved the initiation of a cash
dividend policy. The dividend policy will enable the company's
shareholders to enjoy long-term cash flow generated by multiple
sclerosis drug Tysabri.
) had gained full strategic, commercial and operational control
over Tysabri for an upfront payment of $3.25 billion to Elan.
Following the news, Elan announced that it will invest a part of
its net proceeds of $3.25 billion from the transaction in
different business assets. The company further stated that it
intends to refinance its outstanding debt by a share repurchase
program by utilizing $1 billion of the upfront proceeds post the
restructuring of Tysabri.
As per the dividend policy, Elan will be paying a percentage
of the Tysabri royalty, paid by Biogen, to its share holders.
Initially, 20% of those royalties will be paid to the
As per the transaction, which is expected to go through in the
first half of this year, Biogen will make a royalty payment of
12% on the worldwide net sales of Tysabri (for all indications).
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 on
over $2 billion of global net sales of Tysabri. Tysabri sales
were $1.6 billion in 2012.
Last week, Royalty Pharma, a private entity, showed interest
in acquiring Elan at $11 for every share of Elan and its American
Depository Shares (ADS). Given that Elan's Board has approved the
proposed dividend policy, we believe that the company is not
taking Royalty Pharma's offer into consideration.
However, Royalty Pharma is not loosing hope. The company is
currently discussing with the Elan shareholders and is ready to
implement a new offer. Royalty Pharma believes that it will be
able to complete due diligence in 20 days.
We expect Elan to actively pursue more in-licensing deals or
acquisitions. Elan, a biotechnology company, currently carries a
Zacks Rank #5 (Strong Sell). Other well placed biotech stocks
). While Agenus carries a Zacks Rank #2 (Buy), Cytokinetics
carries a Zacks Rank #1 (Strong Buy).
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ELAN CP PLC ADR (ELN): Free Stock Analysis
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