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Analyst Blog

Elan Corporation plc recently received more visibility regarding its proposed takeover by Royalty Management LLC (Royalty Pharma). The Irish Takeover Panel recently extended the deadline on Royalty Management LLC to May 10, 2013.

As per the imposition by the Irish Takeover Panel, Royalty Pharma must either make an offer to Elan under rule 2.5 of the Irish Takeover Rules or must notify that it will not proceed with the same by May 10, 2013.

Notably, in Feb 2013, Royalty Pharma showed interest in acquiring Elan at $11 for every share of Elan and its American Depositary Shares (ADS). We note that 1 ADS is equal to 1 share of Elan. Royalty Pharma’s offer represented a premium of 6.3% to Elan’s closing price on Feb 15, 2013.

In its latest press release Elan stated that it will take into consideration any credible proposal from Royalty Pharma or any other company alongside the strategic transactions. We expect investor focus to remain on Royalty Pharma’s offer going forward.

Meanwhile, Elan recently closed its Tysabri (natalizumab) collaboration transaction with Biogen Idec (BIIB - Analyst Report). As a result, Biogen gained full strategic, commercial and operational control over the multiple sclerosis drug.

We believe that the loss of Tysabri is a huge setback for Elan since the product was its primary source of revenue. Elan, a biotechnology company, currently carries a Zacks Rank #5 (Strong Sell). The bearish rank is largely due to the setback.

Currently, well-placed biotech stocks include Cytokinetics Inc. (CYTK - Snapshot Report) and QLT Inc. (QLTI - Analyst Report). Both stocks carry a Zacks Rank #1 (Strong Buy). Biogen also carries a Zacks Rank #1 (Strong Buy).

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