DUBLIN May 15 Royalty Pharma last
year urged Elan to hold off on a multi-billion dollar
drug deal until it had taken the Irish drugmaker private to
boost the compensation the firms' executives would receive, Elan
said on Wednesday.
Royalty submitted a $5.7 billion bid for the Dublin-based
firm this month, standing by a reduced price in the face of
Elan's insistence it is worth more. Elan rejected the $11.25 per
share bid last month and is determined to keep its independence.
Elan's charge on Wednesday that Royalty wanted executives to
benefit from the sale of its share in blockbuster multiple
sclerosis drug Tysabri at the expense of shareholders comes two
weeks before those shareholders make up their minds on the bid.
The claim marks the latest effort by Elan management to
persuade the company's shareholders to reject Royalty's offer.
Chief executive Kelly Martin said in an interview with Reuters
this week that he had not spoken to one shareholder who thought
Royalty's bid was credible.
In February, Elan sold its 50 percent interest in the drug
to U.S. partner Biogen Idec for $3.25 billion plus
royalty rights of up to 25 percent. It will hand over a fifth of
that royalty stream to shareholders and has also bought back $1
billion of shares with the proceeds.
In its offer document published earlier this month, Royalty
revealed that talks between the two began six months before its
initial approach, first focussing on Elan buying Royalty before
switching to the U.S. investment firm taking Elan private.
However, Elan said in its reply to the offer published on
Wednesday that Royalty chief executive Pablo Legorreta told Elan
boss Martin at a meeting last October that the Tysabri deal
"should not be undertaken or even contemplated until Elan was
private and part of Royalty Pharma."
"On October 12, Mr. Legorreta wanted to emphasize the
message that the compensation within a private entity would be
significantly higher and several times greater than anything he,
Mr. Martin, could earn within a public company," Elan said in
the document, referring to a phone call between the two.
"(He reinforced) that there should not be any Elan/Biogen
Idec transaction regarding Tysabri because there was simply too
much value there to unwind in a public market."
Elan added that Legorreta's only stated reason for his
change of heart last October to take over Elan, rather than the
other way around, was that "as a private entity there is no
visibility or scrutiny on executive compensation."
Royalty, attracted by the promise of lucrative revenues from
Tysabri, made its first approach for Elan in February. Elan has
fought back via manoeuvres to counter the bid, which is
contingent on 90 percent acceptances.
On Monday, Elan agreed on a $1 billion deal to buy 21
percent of the royalties that U.S. company Theravance
receives from GlaxoSmithKline for its respiratory drugs,
the first of what it has said will be a number of acquisitions.
Elan chairman Bob Ingram reiterated in a letter made public
on Wednesday that his board unanimously, and without
reservation, recommended shareholders reject Royalty's offer,
describing it as a "confusing and a continuously moving target."