Elan pays $1 billion for a 21% share of Theravance royalties on four respiratory programs

US biotech firm Theravance (Nasdaq: THRX) has entered into a royalty participation agreement wherein Ireland-based Elan (NYSE: ELN) will purchase a participation interest in potential future royalty payments related to four respiratory programs partnered with UK pharma giant GlaxoSmithKline (LSE: GSK).

Under the terms of the agreement, Elan will make a one-time cash payment of $1.0 billion to Theravance in exchange for a 21% participation interest in the potential future royalty payments from the four programs when, as and if received by Theravance. For Elan, the subject of a rejected takeover by Royalty Pharma, this is its first strategic deal to utilize the $3.25 billion cash from the Tysabri (natalizumab) transaction with Biogen Idec (The Pharma Letters passim).

Relvar Ellipta/Breo Ellipta (fluticasone furoate (FF)/vilanterol (VI)), Anoro Ellipta (umeclidinium bromide (UMEC)/VI) 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% of the first $3.0 billion of combined annual global net sales, and 5% of combined annual global net sales above $3.0 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%. 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. Last Friday, Breo Ellipta was approved by the US Food and Drug Administration (The Pharma Letter May 13), and the drug is expected to launch in the USA during the third quarter of this year.