* Elan to acquire newly approved Breo as part of deal
* Company says further deals in pipeline
* A fifth of royalties to be paid to shareholders
* CEO says shareholders do not view takeover bid as credible
By Padraic Halpin
DUBLIN, May 13 Irish drugmaker Elan Corporation
has agreed a $1 billion royalties deal that could soothe
concerns about its potentially risky acquisition strategy and
fend off a takeover bid from Royalty Pharma.
Elan, battling to keep its independence after rejecting
Royalty's $5.7 billion bid last month, is buying 21 percent of
the royalties that U.S. company Theravance receives
from GlaxoSmithKline (GSK) for its respiratory drugs.
The Irish company is seeking to diversify from its
neurological focus after selling its 50 percent interest in
multiple sclerosis treatment Tysabri to U.S. partner Biogen Idec
in February for $3.25 billion plus royalty rights.
Royalty Pharma wants to add those rights, worth hundreds of
millions of dollars, to its stable of royalty streams and has
tried to unnerve Elan shareholders by questioning the company's
lack of experience in pulling off big deals.
Elan Chief Executive Kelly Martin denied that Monday's deal
was designed to frustrate Royalty's bid, but some analysts said
the deal may allay fears among investors that Elan would make
high-risk investments in drugs with significant costs attached.
"This (Theravance deal) was not done because of Royalty
whatsoever," Martin told Reuters. "Royalty - to myself, to the
board, to pretty much every shareholder that we can talk to,
frankly - is utterly irrelevant.
"I can say unequivocally that I haven't spoken to one
shareholder who thinks Royalty Pharma's offer is either credible
or of any substance whatsoever."
Elan said that it has more deals in the pipeline and that it
would give its shareholders a fifth of all royalties from the
Theravance deal, matching the 20 percent dividend they are
already set to receive through the royalty stream Elan maintains
The shareholders, who have also been rewarded through Elan's
$1 billion share buyback, have until May 31 to make up their
minds on Royalty Pharma's $11.25-a-share bid. Royalty needs 90
percent of Elan shareholders to accept the bid.
Elan's shares closed at $11.78 in New York on
Monday's deal, part of which will be financed by an imminent
bond issue, hands Elan a chunk of Theravance's interest in four
drugs in late-stage development.
Among them is Breo, a new treatment for chronic obstructive
pulmonary disease (COPD), which was approved by the U.S. Food
and Drug Administration on Friday.
Anoro, a potentially more profitable COPD drug that
Theravance is developing with GSK, is also part of the deal.
The U.S. regulatory approval of Breo, which will compete
with GSK's $8 billion-a-year blockbuster Advair, will make
Monday's deal earnings accretive from next year, Elan said.
Breo, which will branded Relvar outside the United States if
it gains wider approval, is expected by analysts to generate
annual sales of $559 million by 2015, Thomson Reuters data show.
Anoro is expected to generate peak annual sales of nearly $1.4
Analysts were divided on the merits of the deal for Elan.
UBS said that $1 billion seemed pricey, while Deutsche Bank said
that it was difficult to see significant shareholder value being
Berenberg Bank said that, as a pure royalty acquisition, the
agreement put Elan on a more solid financial footing. Jefferies,
meanwhile, said the stake in long-duration drug assets made it
an impressive deal.