Royalty Pharma raised its hostile bid for Irish drug firm Elan to a potential $8 billion on Friday, coming back for the third time after just 7.5 percent of shareholders accepted the last offer.
The U.S. investment firm, seeking to get its hands on Elan's lucrative royalties from multiple sclerosis drug Tysabri, had its first two bids rejected by Elan's board in a battle that has turned increasingly bitter since it began in February.
Royalty is now offering $13 in cash per share - compared with a previous $12.50 - and added a clause known as a contingent value right (CVR) that could add a further $2.50 per share if blockbuster drug Tysabri hits certain sales milestones.
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Elan saw Royalty's previous bids as undervaluing the company - which it believes commands a value of between $15.50 and $20.80 - and is trying to convince shareholders that deals it has struck in recent weeks will add more value.
"Royalty Pharma believes the further increased offer is a far superior alternative to what Royalty regards as a high risk strategy of hastily arranged and value destructive acquisitions," the New York-based firm said in a statement.
Royalty said the CVR clause, which Reuters reported it was considering in April, would first be triggered if Tysabri owner Biogen Idec gains approval for using the treatment in secondary progressive MS before the end 2017.
A second payment would be made if annual sales of the drug hit $2.6 billion by the end of 2015, with a third kicking in if they rise to $3.1 billion within the following two years. Tysabri sales rose 8 percent to $1.63 billion in 2012.
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In a note, Deutsche Bank said there was a 50 probability that Biogen would gain the approval required, a 20 percent chance the drug would reach the first sales target and a 25 percent probability that sales would hit $3.1 billion by 2017.
This is a similar mechanism to that used by French drugmaker Sanofi to finalize its $20.1 billion deal for Genzyme Corp in 2011, and competes with a promise from Elan to its shareholders that it would hand over a fifth of its royalty stream from the blockbuster drug to them.
Elan shares were up 4.9 percent at $13.30 in pre-market trading in New York and some analysts still doubted that Royalty had offered enough to win shareholders over.
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"Okay it's a sweetening but my initial take is that it is probably insufficient," said Vincent Meunier, analyst at Exane BNP Paribas.
"I remain skeptical. I have the sentiment that for the management and main shareholders of Elan, this price will not be enough. It's likely to be a long battle."
Royalty kept the acceptance threshold for its offer at 50 percent plus one share. Its bid also remains conditional on Elan shareholders rejecting a series of recent transactions conducted by Elan to counter Royalty's bid. That would have to happen at a key June 17 meeting.
Royalty Pharma received a blow in the heated battle on Thursday when a ruling relating to that meeting threatened to scupper the deal.
In an attempt to stop the Dublin-based firm pushing through its defensive acquisitions, Royalty last month made its second offer conditional on Elan shareholders rejecting "any transaction" they would be asked to back.
However, after Elan said only two of the four transaction to be put to the meeting concerned the acquisitions, Royalty sought a ruling from the Irish Takeover Panel confirming that it would not be obliged to drop out if all four votes were carried.
The panel decided on Thursday that Royalty could not revise its terms, meaning its bid will lapse if Elan shareholders back either of the other two uncontentious resolutions - a share buyback and a drug spin-off aimed at cutting operating costs.
In a further twist, Elan has also won temporary relief from a U.S. District Court stopping Royalty from closing its tender offer after Elan argued the New York-based investment firm's disclosures in its increased bid were "materially inadequate."
The court will meet again on June 11 to decide whether or not to grant a preliminary injunction against Royalty.