By Padraic Halpin
DUBLIN (Reuters) - Irish drug firm Elan agreed on Monday to buy two private drug firms, spin-off its one experimental drug and buy back more shares to give a firmer idea of how the company will be reconfigured as shareholders weigh up a takeover bid.
The Irish company has rejected a $5.7 billion bid from U.S. investment firm Royalty Pharma and is trying to convince shareholders to do the same by returning cash and going on a spending spree that began with a $1 billion royalties deal just a week ago.
Elan made its second and third purchases on Monday, buying Austrian rare drug specialist AOP Orphan for 263.5 million euros ($337 million) and paying $40 million for a 48 percent stake in Dubai-based sales and marketing firm Newbridge pharmaceuticals.
It will still have $1.2 billion of cash left to spend if shareholders approve the acquisitions, and plans to announce more deals in the second half of the year, chief executive Kelly Martin said on Monday.
The deal with AOP Orphan, which has annual revenues of over 50 million euros, hands Elan a number of mainly hematology and oncology-focused drugs and experimental treatments on top of its own existing and newly purchased royalty streams.
"The timing of this has nothing to do with the Royalty offer itself but it's being communicated this way because this allows shareholders a choice," Martin told Reuters in a telephone interview.
"(Do) they want to sell their shares to Royalty at a discount or do they want to continue to be invested in an entity that is creating a portfolio of interesting and different assets?"
New York-based Royalty, attracted by the lucrative revenues from Elan's interest in blockbuster multiple sclerosis drug Tysabri, submitted a reduced $11.25 per share bid last month.
Elan shares, up more than 10 percent since Royalty's first approach in February, closed at $11.67 in New York on Friday.
Elan sold its 50 percent interest in Tysabri to U.S. partner Biogen Idec in February for $3.25 billion plus royalties of up to 25 percent, and soon after rewarded investors with a $1 billion share buyback and slice of the Tysabri rights.
It further sweetened its appeal to shareholders on Monday, saying it would repurchase another $200 million of shares. It also plans to issue $800 mln of debt to fund future deals.
Elan added that it would spin off its remaining experimental drug, Alzheimer's treatment ELND-005, into a private company to eliminate operating expenses but it will keep an 18 percent stake by committing $70 million to the new entity.
The share buyback and package of deals, including last week's purchase of 21 percent of the royalties that U.S. company Theravance receives from GlaxoSmithKline (GSK), must be approved at a special shareholder meeting on June 17.
($1 = 0.7798 euros)
(Editing by Richard Pullin and Patrick Graham)