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Royalty Pharma in $6.6B Bid for Elan -- AND -- Dynavax Gets CRL; Stock Dives

By Cormac Sheridan
Staff Writer

DUBLIN, Ireland ‑ Shares in Elan Corp. plc jumped more than 8 percent to $11.50 during early trading Monday in response to an indicative $11 per-share takeover offer from Royalty Pharma. Although Dublin, Ireland-based Elan issued a critical response to the offer, which represents a 4 percent premium to its closing share price Friday, it was not an outright refusal. The investor response suggests there is an appetite in the market for an exit. The company is now in play.

With the ink barely dry on its new post-Tysabri strategy to diversify its business through acquisitions and in-licensing deals and to return $1 billion cash to shareholders, Elan Corp. plc suddenly has another major strategic possibility to consider.

New York-based Royalty Pharma is offering the certainty of cash today versus the uncertainty attached to Elan's ability to acquire or in-license assets that have no visibility at present, plus the added uncertainty over future revenues for the multiple sclerosis drug Tysabri (natalizumab), in which it retains a substantial minority interest.

"I think it's not totally unreasonable," Richard Parkes, analyst at Deutsche Bank in London told BioWorld Today. "I think there's room for Royalty Pharma to increase the offer." The gap between what Parkes considers a fair offer and what the stock's current trading price is small.

"If it's getting close to $12, it's fair value for locking it in today," he said. At $11 per share, however, it may be too parsimonious. "It's a 9 percent discount to my net-present-value valuation," he said.

Strip out the $3.25 billion cash Elan will receive for Tysabri, once its asset disposal deal with Biogen Idec, of Cambridge, Mass., closes, and Royalty Pharma's offer represents a discount of almost 17 percent on Elan's remaining royalty stream for the product.

In tabling the offer, Royalty cast doubt on Elan's ability to execute successfully its diversification strategy ‑"the current senior management team of Elan has not made any significant acquisitions or in-licensed any significant late stage products for Elan and thus does not have a track record of generating attractive returns from acquisitions or in-licensed products for Elan," it stated in a news release.

For its part, Elan said it "notes the heavily conditional nature of this indication of interest. Any credible proposal which may be made by Royalty Pharma or any other party will of course be considered by the company" in parallel with its newly minted strategy.


Dynavax Crushed in Morning Trading on Hepatitis B Vaccine Rejection

By Catherine Shaffer
Staff Writer

The FDA denied Dynavax Technologies Corp.'s application for approval of its Heplisav hepatitis B vaccine, issuing a complete response letter (CRL) to the troubled product, which took heavy fire in an advisory panel meeting over its safety profile.

Dynavax stock (NASDAQ: DVAX) spiraled down 36 percent Monday morning. It closed at $2.97 Friday and was trading at $1.08 in a heavy volume around 10:30 am EST.

In the letter, the FDA said the product needs further evaluation for safety in the broad 18- to 70-year age group, and that it was concerned the novel adjuvants could cause rare autoimmune events. The agency was willing to continue discussions for a more restricted label for Heplisav.

The FDA also requested additional data from Dynavax on its process validation program and clarifying information about manufacturing controls and facilities.

Dynavx's next step is to meet with the FDA to discuss the application further, and it believes that meeting will happen within the next six weeks.

Dynavax sought approval for immunization of adults 18 through 70 against infection by all known subtypes of hepatitis B, and for vaccinating patients with chronic kidney disease.

The company tested the vaccine in over 4,800 patients. Last year, it reported final data from a pivotal Phase III trial showing that the vaccine protected 90 percent of CKD patients compared to 82 percent of those receiving Engerix-B (GlaxoSmithKline plc) at the primary endpoint (p=0.01), one month after the third dose of Heplisav and the eighth dose of Engerix-B.

More analysis showed Heplisav worked in more than twice as many patients at two months. Dynavax reported top-line data for the 516-patient trial in October 2011. In a separate trial, in CKD nonresponders on hemodialysis who failed to develop protection after two or more previous vaccination series with licensed vaccines, new data showed a higher protection rate for Heplisav compared to Engerix-B and Fendrix (GSK).

However, autoimmune events plagued Heplisav trials. Though none has been definitively linked to the vaccine, the FDA at one point slapped a clinical hold on a trial after a patient in the active-drug arm developed Wegener's granulomatosis.