Voting for ‘None of the Above’ At Elan

The latest development at Elan is that the Company went to court to block Royalty Pharma‘s buyout bid, which says something about their confidence that they can make the case to their own shareholders. The shareholders deserve something better than the options at hand: Management’s manicky and scattershot spending spree (see below), or Royalty Pharma’s coupon-clipping, which would eliminate a potentially productive resource from the neuropharm world. There should be a third option, somewhere between Reckless and Reclusive.
Speaking of manicky management, this is from NP June:
Two lists. The first is from the NIMH, their list of behavioral symptoms associated with a bipolar disorder in or entering manic phase (emphasis in bold is ours):
1) Talking very fast, jumping from one idea to another, having racing thoughts
2) Being easily distracted
3) Increasing goal-directed activities, such as taking on new projects
4) Being restless
5) Sleeping little
6) Having an unrealistic belief in one’s abilities
7) Behaving impulsively and taking part in a lot of pleasurable, high-risk behaviors, such as spending sprees, impulsive sex, and impulsive business investments.

The second list summarizes Elan’s corporate decision-making over the past month:
1) Purchased 21% of Theravance‘s royalty stream from GSK‘s sales of COPD drugs for $1 billion.

2) Bought 48% of Newbridge Pharmaceuticals, for $40 million, and an option to buy the rest for $244 million in two years. Newbridge buys drugs to market in the Middle East, Turkey, and Africa.

3) Paid $343 million for AOP Orphan Pharma, which is developing drugs for rare disorders in the fields of hematology, cardiology, pulmonology.

4) Raised $850 million in another bond deal, and is buying back $200 million in stock in a repurchase.

While they have lots of experience with selling and redeeming debt, Elan has no experience with marketing in the Middle East and Africa, developing drugs for orphan hematological disorders, or with chronic obstructive pulmonary disease (COPD). They have essentially traded the relatively known quantity of the Tysabri asset for the unknown potential of the COPD royalty stream. If they receive shareholder approval for these deals, they will have just $700 million left from the $3.3 billion received. They mention they might buy Amarin. They continue to be contemptuous of Royalty Pharma’s buyout offer, now increased—and one has to love the sheer chutzpah of their claim that the Tysabri royalties Royalty Pharma covets are so valuable, apparently more so than the Tysabri rights they sold to Biogen-Idec. We do not know, and do not want to know, whether any of the private, organismic features are present, but based on the publicly observable behaviors, it’s regrettable that Elan also chose to spin out a drug with potential in bipolar disorder, ELND 005, into Speranza Pharmaceuticals. That compound might have been useful inhouse.

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