) recently inked a deal with
) to purchase a participation interest in potential future
royalty payments for a one-time cash payment of $1.0 billion. The
royalty payments are related to the four respiratory programs
that Theravance partners with
Elan is expected to receive a 21% participation interest in
potential future royalty payments from the four respiratory
programs: Relvar Ellipta/Breo Ellipta, Anoro Ellipta, MABA
(bifunctional muscarinic antagonist-beta2 agonist) monotherapy
(GSK961081, or MABA '081), and vilanterol (VI) monotherapy.
The transaction is yet to be approved by Elan's shareholders.
In the event of Elan's shareholders approving the deal, it is
expected to complete by the end of June 2013.
We note that Theravance is entitled to receive royalties of
15% from Glaxo on the first $3.0 billion of combined annual
global net sales of Relvar Ellipta/Breo Ellipta and VI
monotherapy. Theravance will be receiving 5% of combined annual
global net sales above $3.0 billion. Ellipta/Breo was recently
approved for the treatment of chronic obstructive pulmonary
disease (COPD) in the US.
Theravance is also expected to receive royalties in the
mid-single digit to 10% on annual global net sales of Anoro
Ellipta on approval. Anoro Ellipta is currently under review in
the US for the treatment of patients suffering from COPD. A final
decision from the US regulatory body is expected in Dec 2013.
Theravance is expected to receive royalties in the range of
10% to 20% for the first $3.5 billion annual global sales of MABA
'081 and 7.5% thereafter. MABA '081 is currently in phase II
development and is expected to be advanced to a phase III study
We believe the agreement is a smart move from Elan. The
transaction will enable Elan to receive royalties on a regular
basis. The transaction will also diversify Elan's current
portfolio. The company expects the transaction to be earnings
accretive from 2014.
The company has taken several strategic initiatives following
the loss of its multiple sclerosis drug, Tysabri. Elan expects to
announce additional strategic transactions in the near term as
Elan, a biotechnology company, currently carries a Zacks Rank
) appears to be more favourably placed in the biotech space with
a Zacks Rank #1 (Strong Buy).
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