Pharmaceutical company Elan is set to offer shareholders a cash dividend policy, allowing them to benefit directly from the long term cash flow generated by multiple sclerosis drug Tysabri.
Elan sold its interest in Tysabri to US firm Biogen for $3.25 billion earlier this month.
The dividend program, which is expected to commence in the fourth quarter of this year, will be directly linked to the market performance of Tysabri, calculated as a percentage of the Tysabri royalty paid to Elan from Biogen. The initial percentage to be paid out directly to shareholders is 20 per cent of those royalties.
According to Elan, there is no cap to the dividend cash payments that will be generated from this direct link between shareholders' equity and the long term cash flow of Tysabri.
“This dividend structure gives shareholders the right to enjoy unlimited participation in the upside from the Tysabri sales increase which we anticipate for the future,” the company said in a statement.
According to the restructured Tysabri collaboration, Elan will receive 12 per cent royalties on in-market sales of Tysabri in the first year from closing and thereafter 18 per cent royalties on in-market sales up to $2.0 billion, and 25 per cent royalties on sales exceeding $2.0 billion. In 2012, in-market sales of Tysabri were $1.6 billion.
Elan chief executive Kelly Martin said that the restructuring of the Tysabri collaboration with Biogen Idec enables the company “to unlock value to the direct benefit of our public shareholders”.
“These value creation initiatives consist of three related but distinctive components: a $ 1 billion dollar share repurchase program, a highly efficient cash dividend that directly links shareholders to the long term performance and cash flow generation of Tysabri and lastly, the addition of specific business assets which will allow for diversification across molecules, therapeutic areas and geographies.”
Separately, Mr Martin said this morning a $6.6 billion approach for the company by US investment firm Royalty Pharma was not credible.
"We simply don't view the Royalty indication of interest as credible. The vast majority of our investor base simply don't view Royalty's indication as worthy of any discussion period," Mr Martin said.
"I wish Royalty well, they can do what they need to do but we're not in any discussions with them at all on any topic and we don't see any need to have those discussions," he added.