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Elan introduces new cash dividend policy for shareholders
by Jeffrey Bouley  |  Email the author


DUBLIN—In what might be a bid to help dissuade Elan Corp. shareholders from considering any future takeover offers by Royalty Pharma, which recently announced its interest in acquiring Elan, the board of directors of Elan on March 4 approved a decision "to initiate a unique cash dividend policy enabling its shareholders to benefit directly from the long term cash flow generated by Tysabri." (for more on the restructuring of Elan's Tysabri deal with Biogen Idec Inc. and other corporate moves recently, see this story.)
According to Elan, the dividend program will be directly linked to Tysabri market performance calculated as a percentage of the Tysabri royalty paid to Elan from Biogen Idec as a result of the recently announced Tysabri restructuring. The initial percentage to be paid out directly to shareholders is 20 percent of those royalties.
There is no cap to the dividend cash payments that will be generated from this direct link between shareholders' equity and the long term cash flow of Tysabri, Elan reports, adding that "This dividend structure gives shareholders the right to enjoy unlimited participation in the upside from the Tysabri sales increase which we anticipate for the future."
Elan expects to pay these cash dividends to its shareholders in twice-yearly installments. The first dividend would likely be paid in the fourth quarter of 2013, subject to the closing of the recently announced Tysabri restructuring. Payment of the dividends will be made in accordance with applicable law, including, where applicable, shareholder approval.
"As announced on Feb. 6, the restructuring of the Tysabri collaboration with Biogen Idec enables us, upon close, to unlock value to the direct benefit of our public shareholders," said Elan CEO Kelly Martin. "These value creation initiatives consist of three related but distinctive components: a $1 billion share repurchase program, a highly efficient cash dividend that directly links shareholders to the long-term performance and cash flow generation of Tysabri and lastly, the addition of specific business assets which will allow for diversification across molecules, therapeutic areas and geographies."
According to the restructured Tysabri collaboration, Elan will receive 12-percent royalties on in-market sales of Tysabri in the first year from closing and thereafter 18-percent royalties on in-market sales up to $2 billion, and 25-percent royalties on sales exceeding $2 billion. In 2012, the in-market sales of Tysabri were $1.6 billion.
Speaking of the new cash dividend policy, its benefits to shareholders and what it suggests about Elan's ability to stand on its own—but making no mention of Royalty Pharma—Martin said, "This provides Elan and our shareholders significant near- and longer-term benefits. We continue to make tangible progress on a variety of corporate development discussions and other strategic developments and anticipate providing further clarity to the marketplace in the coming days and weeks."

In an interview with Reuters, Martin dismissed speculation that this recent announcement was directly related to Royalty Pharma, despite the timing.
"We simply don't view the Royalty indication of interest as credible," he told Reuters. "The vast majority of our investor base simply don't view Royalty's indication as worthy of any discussion, period. I wish Royalty well, they can do what they need to do but we're not in any discussions with them at all on any topic and we don't see any need to have those discussions." 
Code: E03041301



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