Shares in biopharma group Elan jumped sharply yesterday on news that its US partner in the Tysabri multiple sclerosis drug programme had put itself on the market.
The stock hit €17.99 at one stage in Dublin - its highest level since February 2005 - before easing to close on €16.85, a gain of 6.65 per cent in the session.
Biogen Idec said it had authorised its management "to evaluate whether third parties would have an interest in acquiring the company". The move followed a number of expressions of interest, including one from Biogen shareholder and activist investor Carl Icahn.
Elan and Biogen each have a 50 per cent interest in Tysabri and expect the drug to be a leading driver of revenues in the next few years. Their collaboration agreement allows the partners first refusal in the event of a change of ownership at either company.
Mr Icahn said yesterday that Elan would not block his bid to purchase Biogen. "If an offer was made, Elan would not activate its change-of-control provision," for Tysabri, Mr Icahn said. "I don't think they wanted to be a poison pill. That's very important. It opens the door a lot."
Mr Icahn bid $23 billion last week for Massachusetts-based Biogen and believes the company is worth more, according to people familiar with his offer. Mr Icahn said at the time that Biogen had a "tremendously valuable pipeline that's gone unnoticed".
Elan yesterday issued a statement noting the Biogen announcement. A spokeswoman said the company would not comment on Mr Icahn's statement, although Dublin analysts said he was unlikely to have made an approach for Biogen without clearing his lines first with Elan.
Elan said several options would be open to it in the event of a change of control at Biogen.
It could acquire Biogen's 50 per cent share of Tysabri, continue with or amend the existing agreement or, in certain circumstances, sell its 50 per cent interest in the drug it developed.
The Irish company said it had appointed Lehman Brothers to assist in the process.
Analysts in Dublin said it was unlikely that Elan, which is not expected to return to profit until 2009, would be in a position to buy Biogen's economic interest in the MS drug.
NCB analyst Orla Hartford said "depending on the acquirer, the most likely outcome would be for Elan to continue with the current agreement or renegotiate the terms of the existing agreement" to allow it a more favourable profit split.
Ian Hunter at Goodbody said he expected annual sales of Tysabri to peak in 2009 at about $2.1 billion. He noted, however, that Biogen's figures imply sales of $2.8 billion by 2011.
"At a multiple of somewhere between 4.5 and five times peak sales, this would put a commercial value on Tysabri of $9.5 billion to $14 billion - with Elan's portion breaking out at $10-$15 a share," Dr Hunter said.
In New York trade last night, Elan was 7.4 per cent firmer at $24.01, off earlier highs of $24.75. Biogen was trading at 17.9 per cent stronger on $81.86.
- (Additional reporting, Bloomberg)
