DUBLIN, Ireland – In a sharp slap in the face to the company's management and its would-be acquirer Royalty Pharma, shareholders in Elan Corp. plc voted down three of four motions tabled at an extraordinary general meeting Monday.

The move scuppers Royalty's bid, which was contingent on the rejection of all four proposals. But it also represents an overwhelming vote of no confidence in the M&A strategy that Elan CEO Kelly Martin put together with his management team since it sold its interest in the multiple sclerosis drug Tysabri (natalizumab) for $3.25 billion plus royalties on future sales.

The writing was on the wall by Friday afternoon, as proxy votes cast in advance of the meeting showed that Elan's management would not have sufficient support for its proposed $1 billion acquisition of a 21 percent stake in South San Francisco-based Theravance Inc.'s royalties from the respiratory franchise it shares with London-based Glaxosmithkline plc or for its plan to buy Vienna, Austria-based AOP Pharmaceuticals AG or the plan to spin out ELND005 (scyllo-inositol) into a new Irish start-up, Speranza Therapeutics Ltd. (The latter firm is headed by former Elan executive Seamus Mulligan, who sold his previous venture, Azur Pharma Ltd., to what is now Dublin-based Jazz Pharmaceuticals plc last year.)

Shareholders did, however, vote in favor of a $200 million share buyback. "It does make you wonder whether the shareholders have shot themselves in the foot here," Nick Turner, analyst at Mirabaud Securities, in London, told BioWorld International.

New York-based Royalty Pharma has, arguably, done the same thing. By making a rejection of all four motions a condition of its offer, it set itself a higher bar than it needed to, as neither the $200 million share buyback nor the Speranza transaction was hugely material to the bid.

An attempt to drop those two conditions was rejected by the Irish Takeover Panel, and Royalty is now seeking to overturn that decision in a hearing scheduled for Dublin's high court. Elan also is party to the proceedings, although, at this stage in the game, the case appears to have been overtaken by events.

Meanwhile, Elan has put itself up for sale, citing its receipt of several expressions of interest. The company has invited Royalty to participate in this as-yet-undefined process. Apart from Royalty and, perhaps, Weston, Mass.-based Biogen Idec Inc., which could decide to buy its way out of future royalty obligations, there are no other obvious takers.

Turner is skeptical that the company can achieve what it regards as its fair value, which is between $15.50 and $20.80 per share. "Elan to the shareholders is worth less today than it was on Friday," Turner said. "I think that Royalty was overpaying on the last offer." That last offer comprised $13 in cash plus $2.50 in contingent value rights linked to Tysabri's future performance. (See BioWorld Today, June 11, 2013.)

Whatever deal is consummated will be focused on financial engineering considerations rather than science, as Elan is effectively now a cash shell, albeit one with very high running costs. Apart from its Tysabri royalty stream, its $2 billion cash pile and the ELND005 development program, the company has an 18 percent interest in Dublin-based Prothena Corp. plc, its former drug discovery business. It also retains a 24.95 percent stake in the Alzheimer's immunotherapy program based on bapineuzumab. Although a subcutaneous formulation of the drug is still undergoing clinical trials, expectations are low, as the intravenous version failed in a pivotal Phase III program. Elan may have to pay up to $93.2 million in R&D costs this year.

As a consequence of the Elan deal going south, AOP has decided to spin out Activartis GmbH, a Vienna-based cancer vaccine maker in which it held an 80 percent stake, to a group of private investors.