Royalty Pharma has made an unsolicited offer to acquire the Irish pharmaceutical Elan for $6.55 billion. The offer was made ten days after the announcement that Biogen Idec would acquire Elan’s 50 percent interest in the multiple sclerosis drug Tysabri for a one-time cash payment $3.25 billion, with Elan retaining a 12 percent royalty for the first year after the deal closed.

Because Tysabri accounted for most of Elan’s revenue, it left the pharmaceutical basically with a lot of cash and no pipeline. As investors waited to see what company management planned to do with all the cash, Royalty Pharma met with Elan to propose a sale of the company to the buyer of pharmaceutical revenue streams. Royalty Pharma derives its revenue by buying an interest in royalty streams, and to date has purchased interests in several high-profile drugs, such as Gilead Sciences’ HIV drugs Truvada, Emtriva, and Atripla, and Abbott’s arthritis drug Humira, among others.

At a shareholder meeting two days after Royalty Pharma met with company officials, Elan’s management outlined its plan to return $1 billion to shareholders, refinance its existing debt, and make several acquisitions to fill its pipeline. It did not mention the acquisition offer, so Royalty Pharma went directly to shareholders, proposing to buy Elan for $11 a share, a premium of 6.3 percent to the closing share price of Elan stock on February 15, 2013 before the private offer to management.

The deal, says Royalty Pharma, offers Elan Shareholders “an attractive financial alternative that will allow them to realize value for their Elan Stock in cash immediately and eliminate the execution risk associated with identifying, acquiring, integrating and growing attractive assets in the context of a highly competitive strategic landscape.”

The alternative choice, according to Royalty Pharma, is to remain an investor in a company with virtually no assets except for cash and the Tysabri royalty, with expected operating expenses in the range of $170 million to $190 million in the next year, and the risk inherent in investing in yet-to-be disclosed business assets.

Elan’s board responded to the public takeover offer by calling it opportunistic and highly conditional. It noted that it had been working for more than a year on several strategic transactions that it felt could be more beneficial to shareholders. “Returning capital through share repurchase, diversifying business and asset risk/reward through non-traditional business structures while simultaneously capturing the long term high margin royalty income from Tysabri will offer a compelling investment thesis for our current shareholders,” Elan’s board said in its response.

It remains to be seen how the deal will play out. Shareholders remained quiet in the week following the acquisition offer and Royalty Pharma has not issued any other statement.