* Royalty Pharma hopes to meet with Elan shareholder J&J
* Royalty Pharma first approached Elan last year
By Jessica Toonkel
March 6 U.S. investment firm Royalty Pharma
on Wednesday stood by its offer to acquire Irish
drugmaker Elan, which has rejected the approach, and
said it was ready to move quickly and could complete due
diligence within 20 days.
The firm is scheduling meetings with 10 to 15 of Elan's
largest shareholders, including Johnson & Johnson, as
well as a few smaller investors, over the next several days,
Pablo Legorreta, chief executive of Royalty Pharma, told
Reuters. The firm is meeting with nearly a dozen shareholders
this week alone, with the first talks taking place on Wednesday.
"We are very confident that our offer gives Elan
shareholders a very attractive alternative," Legorreta said. "We
really need access to the books to do due diligence."
Royalty Pharma made a $6.6 billion approach last week after
Elan announced last month a $3.2 billion plan to sell its 50
percent stake in multiple sclerosis drug Tysabri to its U.S.
partner, Biogen Idec.
Elan rejected Royalty Pharma and on Monday sweetened its
offer to its shareholders, saying it would give them 20 percent
of future royalties from Tysabri. It had already planned to
return $1 billion to shareholders after the drug sale.
"The 'proposal' by Royalty Pharma remains an indication of
interest, is highly conditional, and may or may not lead to an
offer being made for the entire issued share capital of the
company," Elan said in a written statement on Wednesday. "The
highly conditional indication of interest is opportunistic in
Royalty criticized Elan for not taking its bid to Elan
shareholders. It also criticized Elan's sweetened offer to
Given the competitive M&A landscape in the sector, Elan's
lack of experience in making acquisitions, and the fact that
without existing products there are no synergies for Elan to
realize through acquisitions, Royalty Pharma believes Elan will
have a tough time growing on its own, Legorreta said.
"There are companies that have been doing this for a longer
period of time," he said. "When you look at what is required to
be successful in that kind of strategy, having an
infrastructure, having product and having a sales force is
important, and Elan lacks that," he said.
Royalty Pharma is confident that shareholders, some of whom
have reached out to the company, will be in favor of its
When Royalty Pharma contacted Elan shareholder Matt Strobeck
a few days ago, he told them he would tender at "a modest
premium" to Royalty Pharma's $11-a-share offer, Strobeck told
Strobeck, a former partner at Boston-based Westfield Capital
Management Co, which in 2009 owned 18.8 million Elan shares,
sold most of his personal stake in Elan over the past few years
but still owns some shares in custodian accounts. Strobeck
declined to say how many Elan shares he sold or still owns.
"In the end, they sold the rights to their most important
asset and now it is truly like a royalty company in and of
itself," Strobeck told Reuters.
"In most companies I own there is no way I would tender
unless the premium was significantly higher, but in this case I
would take a modest premium to $11 bucks since I view the
potential for future value destruction as significant."
Legorreta declined to say if J&J, which owns 18 percent of
Elan, is in favor of the deal or to identify the other Elan
shareholders meeting with Royalty Pharma.
Fidelity Management & Research is the second-biggest
shareholder in Elan with 13.79 percent, according to Thomson
Reuters. Invesco Asset Management is the third-largest with 8.7
J&J, Fidelity and Invesco declined to comment.
Royalty Pharma has been talking to Elan about a possible
deal since last autumn, Legorreta said.
Royalty Pharma questioned whether Elan would have any value
at all after the Biogen deal is completed. It also said that as
the world's largest buyer of pharmaceutical royalty revenue
streams, Royalty Pharma may be the only buyer for Elan.
Earlier this week, Elan Chief Executive Kelly Martin told
Reuters that his company did not view Royalty Pharma's offer as
credible and said the majority of its investors did not believe
the bid was worthy of a discussion period. He also said he
expected the Tysabri deal to close in a month or two.
Elan shares were down 15 cents to $11.72 in midday trading
on the New York Stock Exchange.