Liquidity preference

Elan Corp. plc is betting that a $1 billion investment for a share of Theravance Inc.'s royalties will give ELN shareholders a better return than could be realized by getting their capital back now. But Theravance shareholders were only too happy to hear they will be getting some or all of that cash now rather than waiting for the royalties to start flowing.

After selling much of its stake in multiple sclerosis drug Tysabri natalizumab to Biogen Idec Inc. for $3.3 billion in February, Elan pledged to return $1 billion to shareholders and find strategic transactions to put some of the leftover money to work...