Elan Corporation plc
) recently announced results from several studies of multiple
sclerosis drug, Tysabri (natalizumab).
Results from the studies showed that Tysabri showed a lower
rate of first relapse compared to Biogen's Avonex (interferon
Teva Pharmaceutical Industries Limited
) Copaxone (glatiramer acetate). Results also showed that
anti-JCV antibody status was consistent in 90% of the patients in
The studies also showed that if progressive multifocal
leukoencephalopathy (PML) is detected early, it will result in
We note that, Biogen will gain full strategic, commercial and
operational control over Tysabri for an upfront payment of $3.25
billion to Elan.
As per the terms of the transaction, which is expected to go
through shortly, Biogen will make a royalty payment of 12% on
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.
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 transaction of Tysabri.
In Feb, 2013, 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
recently approved the proposed dividend policy and provided an
update on its proposed share repurchase program, we believe that
the company is not taking Royalty Pharma's offer into
However, Royalty Pharma is not losing hope. The company is
currently discussing the matter with Elan shareholders and is
ready to make a new offer. Royalty Pharma believes that it will
be able to complete due diligence in a few days.
Elan, a biotechnology company, currently carries a Zacks Rank
#5 (Strong Sell). Currently, well-placed biotech stocks include
), which carries a Zacks Rank #1 (Strong Buy). Meanwhile, Biogen
carries a Zacks Rank #2 (Buy).
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