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Theravance and Elan enter into a billion-dollar royalty participation deal
05-13-2013
EDIT CONNECT
SHARING OPTIONS:
SOUTH SAN FRANCISCO, Calif. & DUBLIN—In what may be in part an attempt to fend off a
takeover attempt of Elan Corp. by Royalty Pharma, Theravance
Inc. and Elan on May 13 entered into a royalty participation
agreement wherein Elan will
purchase a participation interest in potential future royalty payments related
to four respiratory programs partnered with
GlaxoSmithKline plc (GSK): Relvar
Ellipta/Breo Ellipta, Anoro Ellipta,
MABA (Bifunctional Muscarinic
Antagonist-Beta2 Agonist) monotherapy (GSK961081, or MABA '081), and vilanterol
(VI) monotherapy.
Under the terms of the agreement, Irish company Elan will make a one-time
cash payment of $1 billion to U.S.-based Theravance
in exchange for a 21-percent participation
interest in the potential future royalty payments from the four programs when,
as and if received by
Theravance.
"We are very excited to partner with Elan in a
transaction that recognizes the
significant value of four programs from our GSK
collaborations targeted at respiratory disease," said Rick E Winningham,
Theravance's CEO. "This
agreement complements our strategy
to facilitate and accelerate the return of capital to our stockholders and
build value, consistent with our recently
announced plan to separate Theravance
into two entities, Royalty Management Co. and
Theravance Biopharma."
Over at Elan, CEO
Kelly Martin said, "This transaction, upon closing, will
immediately diversify our
business with an investment in four high quality and late stage clinical assets
within a large and growing therapeutic area.
This diversification should
benefit our shareholders by spreading the inherent risk embedded in any one
specific asset. In addition, the long-term and
future potential cash flow
streams and net income will be shared with investors both directly
—through a
dividend pass-through
—and indirectly through overall after tax earnings."
"Being involved, even
indirectly,
with an important therapeutic area that addresses the needs of millions of
patients who suffer from respiratory disease is particularly
meaningful to all
of us at Elan," he added.
Relvar Ellipta/Breo Ellipta, Anoro Ellipta
and VI
monotherapy have been developed under the LABA collaboration with GSK.
For Relvar Ellipta/Breo Ellipta and VI,
Theravance is entitled to receive
royalties from GSK of 15 percent of the first $3 billion of combined annual global
net sales and 5 percent of
combined annual global net sales above $3 billion. If The
transaction does not include
any royalty participation interest associated with
UMEC/VI/FF, an investigational medicine also in development under the LABA
collaboration with GSK.
MABA '081 is an investigational medicine in
development under the strategic alliance between
Theravance and GSK. If MABA
'081 is successfully developed and commercialized as monotherapy, Theravance is
entitled to receive royalties from GSK of
between 10 percent and 20 percent of the first $3.5
billion of annual global net sales and 7.5 percent of all annual global net sales
above $3.5
billion.
The transaction does not include any royalty participation
interest associated with MABA '081 in combination
with any other
therapeutically active component, including an inhaled corticosteroid, or any
other MABA compound as monotherapy or in combination.
The transaction is not subject to any material
conditions, other than approval by Elan's shareholders. Elan plans
to promptly
prepare the required documentation to enable a shareholder vote, which Elan has
agreed to hold within 35 days. If approved by Elan's
shareholders, the parties
expect the transaction to be consummated by the end of June 2013.
Where Royalty Pharma figures into all this, say some market-watchers, is that
the deal between Theravance and Elan may be intended, at least in part, to act as a "poison pill" to derail Royalty's attempt to acquire Elan for about
$5.7 billion, a move that Elan has so far rebuffed. The theory by some is that the Theravance deal will add assets to Elan that Royalty Pharma may not want
to acquire.
Also, Elan wants to diversify from
its neurological focus after selling its 50 percent interest in multiple
sclerosis treatment Tysabri to Biogen Idec in February for $3.25
billion plus royalty rights. Those royalty rights are what Royalty Pharma seems to have its eyes on, and has tried to convince shareholders that Elan is
incapable of handling or pulling off big deals. This deal with Theravance, some say, is an attempt to instill confidence in shareholders that such is not the
case.
Martin has countered such thoughts with an insistence that the deal with Theravance was simply good business, and
has nothing to do with Royalty Pharma, maintaining that the Royalty offer is neither credible nor of any substance.
Code: E05131301 Back |
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