Monday, July 29, 2013

Perrigo to acquire Elan for $8.6 billion

Yesterday Perrigo announced that they would be acquiring Elan for $8.6 billion. The deal brings to Perrigo an escalating Tysabri Royalty stream,  tax synergies, ELNF005 (a Phase 2 CNS asset) and $1.9b in net cash.

 We believe the deal is likely to be EPS accretive FY 2014 onwards driven by a jump in Tysabri sales ( JCV patients starting on Tysabri), and diminished R&D expense towards ELND005 (Phase 2 ends in 2014). Perrigo is likely to monetize the asset post completion of ELND005.

The Elan business has about $100M of SG&A and about $80M of R&D today and we believe that management will be able to eliminate most of these costs by the end of F2015. Further, as Perrigo continues to move its corporate structure to Ireland, the tax rate could potentially go below 17%.

Tysabri sales may grow depending on succes in Secondary Progressive indication
Ongoing Phase III trial for Tysabri in secondary progressive indication. Topline data from this trial is expected in 2015. If approved, this would be upside on Tysabri’s sales potential.

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