Elan Corp. to buy back $1 billion of stock after Tysabri sale

In addition, with the restructuring of the Tysabri collaboration with Biogen Idec, Elan will move from the current 50/50 business collaboration to an upfront payment of $3.25 billion and a double-digit tiered royalty structure for the life of the complete Tysabri asset

Jeffrey Bouley
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DUBLIN—Before Royalty Pharma both put Elan Corp. ina new spotlight and stole a lot of that spotlight for itself with a proposed acquisition this week, the big Elan news was its announcementon Feb. 22 about addition strategic moves following the Feb. 6 restructuring of its Tysabri collaboration with Biogen Idec,including a $1 billion stock buyback plan.
 
Under the terms of the Tysabri restructuring, Elanwill move from the current 50/50 business collaboration to an upfront paymentof $3.25 billion and a double-digit tiered royalty structure for the life ofthe complete Tysabri asset. 
 
Upon the closing of the Tysabri transaction, Elan saysit will—in accordance with applicable law and regulation,including by obtainingany required consents or approvals—"execute along three dimensions" as follows:
 
 
First, it will address strategic initiatives, witha portion of the $ 3.25 billion to be invested into a variety of businessassets. From a portfolio point of view, the company says, "these assets will,characteristically, diversify Elan from a product, science/clinical,therapeutic and geographic point of view … In anticipation of agreeing to theTysabri restructuring, we have spent significant time evaluating assets aroundthe world and establishing relationships that might ultimately lead toconstructive strategic transactions."
 
The company's leaders indicate that theyare pleased with our progress along these lines, and they are enthusiasticabout the opportunities that exist—and they expect to be in a position toannounce a number of strategic transactions when the Tysabri restructuringcloses or shortly thereafter.
 
 
Second, Elan plans a debt refinancing followingclosing of the Tysabri transaction, and after that transaction, plans torelease more details regarding debt plans.
 
 
Third, Elan will after the Tysabri deal closingalso go on to institute a share repurchase program by using $1 billion of theupfront proceeds from the Tysabri deal, with the method to be detailedfollowing the transaction closing. "This enables a significant portion of theunlocked value of Tysabri to be returned to shareholders directly," Elan says,and, "Additionally, and as outlined previously, the upfront cash payment toElan will have little to no tax burden and part of our objective is to enableshareholders to benefit directly from that structural advantage."
 
 
Following this transaction, Elan will reportedly retainin excess of $1.5 billion in accumulated tax losses and other structures aswell as our favorable Irish tax structure.
 
 
"We greatly value our shareholder relationshipsand the access to equity capital these relationships give us and we appreciatethe time horizon of many of our long term holders," the company reports,adding, "We will continue to work on ways to unlock incremental value to theirdirect benefit."
 
 
"Understandably, many market participants arelooking forward to further clarity around how we intend to deploy thesignificant upfront payment we will be receiving from Biogen Idec upon theclose of our transaction," said Elan CEO Kelly Martin. "We have been makingsignificant progress in this regard and are prepared to move expeditiously,upon close, on the redeployment of capital."
 
 
"Our actions over the past years have beenconsistent in theme and execution. We have reduced risk (financial, assetconcentration, infrastructure burden) while, at the same time, preserving theupside from future advancement of science, clinical or commercial products," hecontinued. "By unlocking a portion of the Tysabri asset value while retaining asignificant earnings upside, we have a unique opportunity to rewardshareholders, diversify our business and create a highly distinctive businessplatform upon which to advance to the benefit of shareholders and patientsaround the world."

SOURCE: Elan Corp. news release
 
 

Jeffrey Bouley

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