Biopharmaceutical company Theravance Inc. (THRX) and Ireland-based biotechnology company Elan Corp plc (ELN, ELA.L) said Monday that the two companies entered into a $1 billion royalty deal. Shares of Theravance are currently gaining almost 15 percent in the regular trading session following the announcement.
Under the terms of the deal, Elan will pay $1 billion to Theravance in exchange for a 21 percent interest in potential future royalty payments from four respiratory programs partnered by Theravance with GlaxoSmithKline plc (GSK).
Elan, currently the target of a hostile takeover bid by privately-held investment company Royalty Pharma, will receive 21 percent of future royalties related to the four respiratory programs - Breo Ellipta, Anoro Ellipta, MABA monotherapy, and vilanterol or VI monotherapy.
The transaction requires approval by Elan's shareholders. Elan has agreed to hold a shareholder vote on the deal within 35 days. If approved by Elan's shareholders, the companies expect the transaction to be consummated by the end of June 2013. Elan will make the upfront payment of $1 billion to Theravance upon closing of the deal.
In February, biotechnology company Biogen Idec Inc. (BIIB) agreed to buy Elan's interest in multiple sclerosis drug Tysabri for $3.25 billion. However, Elan has maintained royalty rights of up to 25 percent in Tysabri.
Breo Ellipta, Anoro Ellipta and VI monotherapy have been developed by Theravance under the LABA collaboration with GSK. Last Friday, the U.S. Food and Drug Administration or FDA approved Breo Ellipta for the long-term, once-daily, maintenance treatment of airflow obstruction in patients with chronic obstructive pulmonary disease or COPD.
For 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 global net sales above $3 billion. If Anoro Ellipta is approved and commercialized, royalties on annual global net sales are upward tiering and range from the mid-single digits to 10 percent.
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.
Rick Winningham, chief executive officer of Theravance said, "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 Company and Theravance Biopharma."
Theravance has previously announced plans to separate its biopharmaceutical operations and its late stage partnered respiratory assets into two independent publicly traded companies, referred to as Theravance Biopharma and Royalty Management Co., respectively.
The company noted that the royalty deal will not change the overall structure of the planned separation, including which assets are expected to be in each company.
Theravance is currently evaluating the optimal strategies to return capital to stockholders of Royalty Management Co following completion of the separation, including through dividends or the repurchase of shares and/or convertible debt.
Royalty Pharma, in mid-April, announced a firm, all cash offer for Elan, valued at up to $12 per Elan share. However, Elan's board unanimously rejected the takeover bid.
In Monday's regular trading session, THRX is trading at $40.11, up $5.17 or 14.80 percent on a volume of 3.04 million shares.
ELN is currently trading at $11.70, down $0.08 or 0.68 percent on a volume of 1.16 million shares.
For comments and feedback: editorial@rttnews.com