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) 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.

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