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Perrigo Company (PRGO) Takeover: is Elan Corporation PLC (ELN) Acquisition Part of a New Irish Pharma Investment Drive?


7/31/2013 9:39:16 AM

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LONDON, UK (GlobalData), 31 July 2013 - Perrigo’s recently announced agreement to buy Irish drug company Elan may be part of a new wave of investment in Ireland’s pharmaceutical industry, says an analyst with research and consulting firm GlobalData.

According to Adefemi Adenuga, GlobalData’s Analyst covering Healthcare Industry Dynamics, US-based generics manufacturer Perrigo can expect to save millions of dollars each year, thanks to Ireland’s relatively low corporate tax rate of 12.5% — less than half of that imposed in the US.

“The tax cushion offered by domiciling the combined company in Ireland will potentially aid in Perrigo’s plans for international expansion and diversification. The company will possibly benefit from the scale-and-scope economies provided by Elan’s current resources and capabilities, which will allow for expansion in Europe,” states Adenuga. “This acquisition highlights the benefits of setting up base in Ireland, and may prove a tempting template for future pharmaceutical investment activity.”

Perrigo has announced that the combined company will be based in Ireland after the completion of the deal, and the firm expects to save more than over $150m in annual taxes and operational expenses.

Under the terms of this new deal, Elan will receive cash-and-stock worth $8.6 billion, with its shareholders receiving $16.50 in cash and shares. But, besides saving in taxes, Perrigo will benefit from royalties resulting from Tysabri, a drug used to treat multiple sclerosis. GlobalData estimates the net present value (NPV) of both the upfront cash payment and royalty sales from Tysabri for the next 10 years to total about $4.3 billion.

The takeover of Elan comes as no surprise considering that most of the company’s operations have either been sold or spun off recently, especially since the failure of bapineuzumab, its experimental Alzheimer’s drug. This sale could potentially stir up the acquisition market with companies trying to reach out to global customers, says Adenuga.

“With Elan now off the radar of companies monitoring acquisition targets, and drug makers, including generic companies such as Sun Pharmaceuticals, looking to expand their international footprint, the second half of 2013 promises to be an interesting one for strategic deals.”

- Comment provided by Adefemi Adenuga, GlobalData’s Analyst covering Healthcare Industry Dynamics.

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