This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

You Have to Love a Lucrative 'Drug Deal'

Acording to The Wall Street Journal's February 26 article by Jessica Hodgson, Royalty Pharma disclosed that it made a $6.55 billion takeover offer for the Irish drug company Elan (ELN).

Royalty, the article reported, approached ELN on Feb. 18 with an offer of $11 a share. ELN hasn't formally responded yet, and it wouldn't surprise this analyst if the company and its shareholders turn the deal down cold.

ELN is devising its own investment plans after the sale of its stake in the multiple-sclerosis drug Tysabri, which was ELN's most successful contemporary drug. "ELN sold its 50% share in Tysabri to its long-term partner Biogen Idec (BIIB - Get Report) for $3.25 billion in a deal announced February 7, retaining a royalty of 12% of Tysabri's global net sales for the first 12 months after the deal is completed," according to the Journal article.

Last Friday ELN announced its plans to return a wallet-pleasing $1 billion to its shareholders. Then it outlined plans to restructure approximately $600 billion in debt and focus on making acquisitions of its own from the money it gets from the sale of Tysabri.

If you're interested in an unusual drug company, ELN may be just the one for you. The leadership of the Dublin, Ireland firm recently had the following to say as part of its response to Royalty's offer, "As previously announced, in anticipation of executing and closing the recently announced Tysabri transaction, the Company's Board of Directors, Executive Management and advisors have been working for over a year on a number of strategic transactions that, should they be consummated, would be to the benefit of our public shareholders.

"Returning capital through share repurchases, diversifying business and asset risk/reward through non-traditional business structures while simultaneously capturing the long-term high margin royalty income from Tysabri will offer a compelling investment thesis for our current shareholders."


Let's look at ELN's 1-year price chart, which also shows its trailing 12-month free cash flow. You're about to see an anomaly that is partly explained by the $600 million in debt I told you about.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ELN $0.00 0.00%
ABT $46.80 -1.30%
BIIB $417.58 -1.90%
GILD $102.01 -1.40%
PFE $34.00 -1.30%

Markets

DOW 17,879.55 -256.17 -1.41%
S&P 500 2,077.01 -24.03 -1.14%
NASDAQ 4,940.0350 -42.7740 -0.86%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs