Shareholders at Elan have seen a lot through the years. But even they must be nonplussed by the frantic claim and counterclaim being put about by the company and Royalty Pharma, which is seeking to acquire it.
As the deadline for the posting of proxy votes on four resolutions that the company hopes will see off the $6.7 billion hostile bidder approached yesterday, both sides were issuing multiple bulletins daily – each presenting their view of events, most noticeably in their interpretations of the reasons for either side’s instigation or dropping of legal actions.
There has been no shortage of advice: what has been sadly lacking is any apparent concern to present shareholders with reliable information and trust them to make a mature investment decision.
On Monday, shareholders gather in Dublin, potentially to decide the fate of what has been one of the most colourful of the long-term constituents of the Irish stock exchange. They will debate four issues: the $1 billion acquisition of rights to royalties in three drugs being developed by US company Theravance Therapeutics; the purchase of Austrian specialty pharma business AOP Orphan; the spin off of ELND-005, its last remaining drug development programme into a company called Speranza; and a share buyback of $200 million. Along with a previous share buyback, this fusillade of activity means Elan will essentially have spent in three months the proceeds of its $3.25 billion deal to sell control of Tysabri to Biogen.
The company says the transactions are part of a structured transformation of the business. However, at the time of the Biogen deal, the same executives warned against expectations of rapid decisions on spending its $3.25 billion.
More significantly, both Glass Lewis and Institutional Shareholder Services, which specialise in advising investors on how to vote on such issues, have advised Elan shareholders to reject all the proposals. If that happens, it is likely that Royalty will have won the hearts and minds of shareholders: if not, it will be forced to walk away – a move UBS yesterday speculated could lead to a fall in Elan's market cap of up to $2 billion.
The stakes are big. Royalty tends to buy streams of royalty income, not companies – and this is certainly their biggest deal to date. It remains to be seen whether Kelly Martin has been too ambitious this time.
