DUBLIN/NEW YORK Royalty Pharma raised its hostile bid for Elan to $12.50 per share and threatened to withdraw the bid if Elan shareholders approve a series of defensive transactions announced by the Irish drug firm.
Royalty Pharma, which buys royalty streams of patented drugs, said Elan's efforts to reinvent itself through a series of acquisitions and debt deals were hasty and ill-conceived.
Royalty's new bid for Elan values the company at around $6.4 billion and comes in the face of Elan's insistence that it is worth more. Royalty previously offered $11.25 a share
Elan rejected the initial bid, described as a "nuisance," and stressed that it is determined to keep its independence.
The Dublin-based company said in a statement that its board would assess the new Royalty Pharma offer but "strongly advised" shareholders to take no action on the bid at this time.
Earlier Monday Elan announced its second major drug deal in less than a week.
Royalty said its new, all-cash offer was conditional on Elan shareholders voting against the acquisitions at a special shareholder meeting set for June 17.
Royalty said Elan "dramatically overpaid" last week when it agreed to pay $1 billion for buy 21 percent of the royalties that U.S. company Theravance receives from GlaxoSmithKline.
Royalty said its takeover offer "represents 100 percent liquidity for Elan stockholders today, which Royalty Pharma believes is a far superior alternative to Elan's high-risk strategy of hastily arranged and value-destructive acquisitions."
It added, "If the Theravance transaction and the other transactions announced today serve as a template, Royalty Pharma believes Elan stockholders should be very concerned about future value destruction and undue risk-taking by Elan."
Royalty also contends that Elan's board has "compromised its ability to freely advise Elan shareholders" because according to the Theravance deal, the board is not allowed to recommend Royalty Pharma's offer at any price without breaching that agreement.
"Royalty Pharma believes it is highly irresponsible and 'off-market' to agree to such provisions," the firm said in a statement announcing its sweetened offer.
Elan sold its 50 percent interest in Tysabri, a multiple sclerosis drug, to U.S. partner Biogen Idec in February for $3.25 billion plus royalties of up to 25 percent, and used the proceeds to reward investors through a share buyback and to plot its spending spree.
Royalty also said on Monday that it reserved the right to reduce the acceptance threshold for its increased offer to 50 percent plus one Elan share from 90 percent previously.
Elan shares in New York, up more than 10 percent since Royalty's first approach in February, were up 3 percent to $12.04 in afternoon trading.
In a string of deals over the past few days, Elan has basically transformed itself into a specialty pharma roll-up of companies from around the world, said Michael Yee, an analyst with RBC Capital Markets.
Now it is up to shareholders to decide if they want to take the risk of letting management try to execute this strategy, he said.
"The company has limited experience in acquiring, consolidating and executing on products in the last five years," Yee said. "That is why it could be risky."
(Reporting by Padraic Halpin and Brenda Goh; editing by Kate Holton, Louise Heavens and John Wallace)