Elan in Royalty Deal with THRX - Analyst Blog
May 14 2013 - 12:30PM
Zacks
Elan Corporation
(ELN) recently inked a deal with Theravance Inc.
(THRX) 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 GlaxoSmithKline
(GSK).
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 this year.
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 well.
Elan, a biotechnology company,
currently carries a Zacks Rank #2 (Buy). Athersys
Inc. (ATHX) appears to be more favourably placed in the
biotech space with a Zacks Rank #1 (Strong Buy).
ATHERSYS INC (ATHX): Free Stock Analysis Report
ELAN CP PLC ADR (ELN): Free Stock Analysis Report
GLAXOSMITHKLINE (GSK): Free Stock Analysis Report
THERAVANCE INC (THRX): Free Stock Analysis Report
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