Elan puts itself on market as prospects for restructuring plan fade

Irish biotech group Elan has put itself on the market after indications that shareholders will reject key elements of its restructuring plan.

In a statement to the Irish Stock Exchange, Elan said it was "proceeding with a formal sale process". It said it was doing so "in light of the expressions of interest received to date". The announcement came just hours after Royalty Pharma, which has offered up to $8 billion for the business, announced that Elan was likely to fall short of approval for key elements of its defence against takeover at an extraordinary general meeting (EGM) of shareholders on Monday.

Shares in Elan, which had dipped sharply on Thursday on news that Royalty might be forced to abandon its offer, surged 9 per cent yesterday on news that the company was now officially on the market.

Review of proxies
Royalty Pharma said a review of proxies representing 311 Elan American depositary shares (ADS) voted by the 3pm deadline on Thursday showed that a majority had voted against two of the key resolutions before shareholders at the EGM.

They are the $1 billion investment in rights to royalty income from three drugs being developed by US company Theravance Therapeutics and the purchase of AOP Orphan, a privately held specialty pharma business in Austria.

On the basis of the scale of the majority, Royalty said it was "confident that those proposals will not pass at Elan's June 17th EGM". It said a narrow majority had voted against spinning off Elan's last remaining development drug programme, ELND-005, into a privately held Dublin company, Speranza Therapeutics.

The ADS proxy review also showed a narrow majority backing the final resolution – a $200 million share buyback. In relation to both of the last two proposals, the current majority could be overturned by ordinary shareholders, who hold just under 25 per cent of the company’s stock.

The 311 million shares referred to by Royalty represent 81 per cent of all ADSs and amount to about 61 per cent of the issued shares in Elan.

Just over 75 per cent of Elan is held by way of ADSs listed on the New York stock exchange, with the balance held in ordinary shares. Each ADS is equal to one ordinary share.

ADS holders
Holders of ADSs had to vote their proxies by 3pm on Thursday. Ordinary shareholders have until 10am today to vote their proxies orthey can vote in person at the meeting in Dublin on Monday morning.

Elan said that as part of the sale process, Royalty Pharma “will be invited to participate if they so wish”. They also advised shareholders not to accept the “hostile offer” from Royalty.

Ahead of Elan’s announcement, Royalty noted that Elan “only publicly announced that it had received ‘unsolicited enquiries’ four days ago, more than three months after Royalty Pharma’s proposal first became public and only after it appeared to be gaining investor support”.

Speaking later, Royalty chief executive Pablo Legorreta said: "Elan shareholders should realise that Elan has only announced a sale process because of Royalty Pharma's offer."

He said that neither Elan nor its advisers had contacted Royalty Pharma despite a process that had already lasted four months.Royalty was last night urging remaining shareholders to vote against all four resolutions on Monday, noting that there was no guarantee any sale would be concluded, only that a process would be started.