Elan has unanimously rejected the latest formal bid from Royalty Pharma, saying it “grossly undervalues” the company.

The new offer of $11.25 (€8.62) per share from Royalty Pharma, lower than an earlier $12.00 offer, comes after a $1 billion share buyback plan by Elan.

Elan chairman Robert Ingram said: “The offer from Royalty Pharma grossly undervalues Elan’s current business platform and our future prospects. As a result the board unanimously and without reservation rejected the offer.”

Royalty Pharma is one of the largest private investment managers in royalties from biopharmaceutical companies. The group has made a number of offers for Elan since announcing its interest in February and its $12 offer valued the company at $7.3 billon. However, all offers have been rejected by Elan management to date.

'Earlier offers'
Deutsche Bank analyst Richard Parkes said, "It's not a huge surprise given that the management had already dismissed earlier offers at $11. It's not a premium to the current price. Royalty Pharma have justified the value of their offer based on what Biogen paid for the 50 per cent of Tysabri that was sold to them."

Elan sold its 50 per cent stake in multiple sclerosis drug Tysabri to Biogen for $3.25 billion earlier this year. The company has returned $1 billion to shareholders through share buybacks and intends to use the rest of the money to make acquisitions. However, Royalty Pharma has argued the company doesn’t have a track record of deals and acquisitions. Royalty Pharma’s latest offer is conditional on receiving 90 per cent backing from Elan shareholders. A deadline of May 10th has been set by the Irish Takeover Panel for the company to make a formal offer to shareholders.

Parkes added: “An offer of $12 is more reasonable and I think they’d have a better chance of galvanising shareholder support with a bid around the $12 level, maybe with a contingent value right [CVR] written for Tysabri but at $11.25 and without management support I think it’s unlikely to be successful.”