Elan "Poison Pill" Deal With Biogen Prevents Rumored Pfizer Takeover

(MoneyWatch)  Elan ended a rally in its stock last week when CEO Kelly Martin said the company was NOT negotiating to sell itself to Pfizer. Oddly, most coverage of the event -- the rumor-fueled stock runup and the bursting of Elan's bubble -- didn't mention the reason why Kelly was so quick to say he wasn't in deal talks.

As the Irish Independent reported Sunday, it's because Elan has a "poison pill" strategy in place for potential acquirers. If any company gains a majority of its shares, that triggers a pre-existing agreement to sell its star MS drug, Tysabri, to Biogen, leaving the acquirer with Elan's other drugs, which mostly nobody cares about. (Pop quiz: name one other Elan drug that's not Tysabri. Answers below!) According to the II, company documents state:

"Our collaborative agreement with Biogen provides Biogen with an option to buy the rights to Tysabri in the event we undergo a change of control which may limit our attractiveness to potential acquirors," according to Elan documents.

Elan is also protected from a takeover by Biogen itself, with the two companies agreeing a deal where Biogen cannot bid for Elan before 2010.

(Wyeth is also partially prevented from buying Elan by the terms of a joint venture.)

The Elan rumors began after Pfizer CEO Jeff Kindler was quoted by the FT saying something completely noncomittal and substance-free about the market for M&As. You can see BNET's previous coverage of Pfizer Pfever here:

• The Pfizer-Shire Deal Worst-Case Scenario
• Pfizer's Big Acquisition Is a Tiny Rights Deal With Cytos
• Starved of News, Press Speculates on Deals for Abbott, Pfizer and Wyeth

Pop quiz answers: Prialt, Azactam, and Maxipime.