Cantillon: Hyperactive Elan betting that it can hold shareholders

In any other circumstances, there would be major concern at the speed with which Elan is spending its $3.25 billion cash pile.

Just a week after agreeing a $1 billion deal to royalties of four new respiratory drugs developed by US group Theravance and to be sold by GlaxosmithKline, the company moved again, spending close to $300 million for an Austrian rare drugs group and a substantial stake in a Dubai-based business.

In addition, it announced a further share buyback and its intention to raise debt again - about $800 million – to boost funds for further deals.

And all this just weeks after a major share buyback and committing itself to handing over a portion of its future Tysabri royalties to shareholders.

It all seems a long way from the determinedly measured, almost clinical approach that has typified the tenure of chief executive Kelly Martin.

Of course, these are not ordinary times for Elan. The company is itself the target of attention – Royalty Pharma, an Irish-based business that makes money by acquiring royalty streams from other companies, has sets its sights on Elan.

Last night’s decision to increase its offer from $11.25 a share to £12.50 a share ahead of a May 31st deadline for shareholders to indicate their interest in the offer shows the sincerity of its intent.

As part of its defence strategy, Elan has been furiously spending the $3.25 billion proceeds of its decision to sell its stake in Tysabri, the multiple sclerosis blockbuster, to partner Biogen Idec – money that Royalty Pharma had seen as one of the major attractions of the deal.

The other part of that deal gives Elan significant and steady royalty income form future sales of Tysabri, which was also attractive to Royalty.

However, Royalty has already had one bloody nose as Elan shareholders took up the last share buyback at terms that indicated they had little interest in a deal. Elan is betting those shareholders are more likely to trust its board that Royalty.

Indications are that they’re right, but whether Elan has a workable portfolio of investments remains to be seen.