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Elan Corporation recently announced the final results of its modified Dutch auction tender offer of a maximum aggregate value of $1 billion. The Dutch auction tender offer, which ended yesterday, was to repurchase its ordinary shares, including ordinary shares represented by American Depositary Shares.

We note that 1 ADS is equal to 1 share of Elan.

As a result of the tender offer, the Dutch auction strike price stands at $11.25. This has resulted in Elan retiring 14.8% of the current shares in issue. The company tendered 116.4 million shares at the strike price, out of which 92.3% (107.4 million shares) were tendered by a corporate shareholder.

In the tender offer, 6.1% (excluding the corporate shareholder tender) of the issued shares were tendered at $12.00 or less and 4.3% of the issued shares were tendered at $11.75 or $12.00. Moreover, 73.1% of all other issued shares, apart from the corporate shareholder shares, were not tendered at any price within the offered range of $11.25 to $13.00.

The tender offer is expected to be accretive immediately for all shareholders. This is in line with the strategy of unlocking the value of multiple sclerosis drug Tysabri.

Following the determination of the Dutch auction strike price at $11.25, Royalty Pharma confirmed that its offer for each outstanding share and ADS of Elan is also the same. Earlier this week Royalty Pharma offered different prices for different Dutch auction strike prices, where it mentioned that if the strike price is $11.25, it will offer the same for each outstanding share and ADS of Elan.

Elan earlier stated that it will take into consideration any credible proposal from Royalty Pharma or any other company. The Board of Directors at Elan is expected assess Royalty Pharma’s offer and will advise its shareholders accordingly.

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

We expect investor focus to remain on Royalty Pharma’s offer to Elan going forward. Elan, a biotechnology company, currently carries a Zacks Rank #3 (Hold). Currently, well-placed biotech stocks include WuXi PharmaTech (WX - Snapshot Report) and QLT Inc. (QLTI - Analyst Report). Both stocks carry a Zacks Rank #1 (Strong Buy).

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