Royalty Pharma last night raised its hostile bid for Elan to $12.50 per share and threatened to withdraw the bid if Elan shareholders approve a series of defensive transactions announced by the drug firm.
Royalty Pharma, which buys royalty streams of patented drugs, said Elan's efforts to reinvent itself through a series of acquisitions and debt deals were hasty and ill-conceived.
Royalty's new bid for Elan values the company at around $6.4 billion and comes in the face of Elan's insistence that it is worth more. Royalty previously offered $11.25 a share.
Elan rejected the initial bid, described as a "nuisance," and stressed that it is determined to keep its independence.
The Dublin-based company said in a statement last night that its board would assess the new Royalty Pharma offer but "strongly advised" shareholders to take no action on the bid at this time.
Earlier yesterday, Elan announced its second major drug deal in less than a week.
Royalty said its new, all-cash offer was conditional on Elan shareholders voting against the acquisitions at a special shareholder meeting set for June 17.
Royalty said Elan "dramatically overpaid" last week when it agreed to pay $1 billion for buy 21% of the royalties that US company Theravance receives from GlaxoSmithKline.
Royalty said its takeover offer "represents 100% liquidity for Elan stockholders today, which Royalty Pharma believes is a far superior alternative to Elan's high-risk strategy of hastily arranged and value-destructive acquisitions."
"If the Theravance transaction and the other transactions announced today serve as a template, Royalty Pharma believes Elan stockholders should be very concerned about future value destruction and undue risk-taking by Elan," it added.
Royalty also contends that Elan's board has "compromised its ability to freely advise Elan shareholders" because according to the Theravance deal, the board is not allowed to recommend Royalty Pharma's offer at any price without breaching that agreement.
"Royalty Pharma believes it is highly irresponsible and 'off-market' to agree to such provisions," the firm said in a statement announcing its sweetened offer.
Elan sold its 50% interest in Tysabri, a multiple sclerosis drug, to US partner Biogen Idec in February for $3.25 billion plus royalties of up to 25%, and used the proceeds to reward investors through a share buyback and to plot its spending spree.
Royalty also said yesterday that it reserved the right to reduce the acceptance threshold for its increased offer to 50% plus one Elan share from 90% previously.
