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$ELN Will Pay $1B For a Stake in an Irish Drugmaker, $THRX

Elan Corp. (ELN) agreed to pay $1 billion for a share of the royalties on new drugs fromTheravance Inc. (THRX) as the Irish drugmaker tries to persuade shareholders to spurn a takeover offer by Royalty Pharma.

Elan will receive 21 percent of the royalties earned by Theravance from GlaxoSmithKline Plc (GSK) on the four respiratory medicines, and 20 percent of that income stream will be paid to Elan shareholders as a dividend, the Dublin-based company said in a statement today. The transaction is subject to shareholder approval, it said.

Elan is adopting an investment model pioneered by Pablo Legorreta, chief executive officer of Royalty Pharma, which has offered to buy Elan for about $5.7 billion. The company’s board last month unanimously rejected the takeover bid, advising shareholders not to take action. Elan plans to announce several more deals this year, Chief Executive Officer Kelly Martin said in a phone interview today.

“This is just one piece of the puzzle,” Martin said. “This deal allows us to invest our long-termcash flow into interesting clinical and commercial assets.”

Elan’s hunt for new assets stems from Biogen Idec Inc.’s Feb. 6 agreement to buy Elan’s stake in the Tysabri multiple sclerosis drug for $3.25 billion in cash plus future royalties. The sale transformed the Irish company into an investment vehicle, since it has no operations. Elan said at the time that it planned to use the cash for possible acquisitions and would return some of the proceeds to shareholders.

‘Risk Spectrum’….”

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