Irish drugmaker Elan said it will give shareholders 20 percent of the royalty rights for multiple sclerosis drug Tysabri in a bid to stave off an approach for the company by U.S. investment firm Royalty Pharma .
New York-based Royalty made its $6.6 billion approach last week, just two weeks after Elan announced it had sold its 50 percent interest in Tysabri for $3.25 billion plus future royalty payments to U.S. partner Biogen Idec .
Elan said on Monday that the "unique" cash dividend policy would give shareholders the right to enjoy unlimited participation in the upside from Tysabri sales and comes on top of its decision to return $1 billion to shareholders.
Elan, in which U.S. group Johnson & Johnson is an 18 percent shareholder, plans to use the rest of the cash on a series of acquisitions and told Reuters last month it had already spoken to several companies.
"This provides Elan and our shareholders (with) significant near- and longer-term benefits," Elan Chief Executive Kelly Martin said in a statement.
"We continue to make tangible progress on a variety of corporate development discussions and other strategic developments and anticipate providing further clarity to the marketplace in the coming days and weeks," Martin added.
In the deal with Biogen, Elan's royalty payments on future Tysabri sales, which rose 8 percent to $1.63 billion in 2012, will be 12 percent for the first year, 18 percent after that and 25 percent when annual sales rise above $2 billion.
The Dublin-based company said shareholders can expect the first of twice-yearly dividend payments in the fourth quarter of 2013, subject to the closing of the Biogen deal.
Elan has called Royalty Pharma's proposed bid highly opportunistic because shareholders had not had the opportunity to assess the full benefit of the Tysabri sale.
Royal Pharma, which buys royalty streams of patented drugs and whose indicative approach was worth $11 per Elan share, said the Irish group's senior management had little experience making acquisitions.
As of last week, Royal Pharma said it had not received a formal response from Elan and plans to spend the next few weeks calling Elan shareholders about its offer, according to a source familiar with the situation.
(Editing by David Holmes)