Irish biopharma group Elan has agreed a deal to transfer ownership of its blockbuster multiple sclerosis drug Tysabri to US partner Biogen Idec in return for a $3.25 billion upfront cash payment.
Biogen will also pay Elan double-digit royalties on future sales of the drug. Tysabri generated sales of around $1.6 billion last year and some analysts predict that the figure could reach $3 billion by 2016.
Under the proposal announced yesterday, Elan will receive royalties of 12 per cent on all sales worldwide for the first 12 months. Thereafter it will receive 18 per cent royalties on sales up to $2 billion globally in any year and 25 per cent on sales above that threshold.
"Elan has swapped hope for certainty in ceding control of the asset to Biogen," Deutsche Bank pointed out in a note to clients. "In addition, the royalty suggests it retains 25 to 30 per cent of future profits."
The $3.25 billion cash payment will dwarf the company's current gross debt of $600 million. Chief executive Kelly Martin said it would "return some portion of this [ cash] to shareholders in some fashion", although he declined to commit to a dividend of share purchase programme.
The nature of the transaction ends speculation that Elan would become a takeover target itself but it leaves unclear the future direction of the company since Tysabri was by far its most important product.
Mr Martin said the deal "provides Elan with significant strategic flexibility" and added that the company was confident about market opportunities globally. He said the company had already been in discussions about possible investments but that it would take some time to invest the money "prudently".
Biogen chief executive George Scangos said: "This is a natural next step for Biogen Idec and Tysabri, and it underscores our deep, long-term commitment to improving the lives of MS patients."
Biogen is a world leader in developing therapies for multiple sclerosis, which afflicts around two million people worldwide.
The transaction marks the final stage in the deconstruction of the highly indebted company Mr Martin took the reins of 10 years ago.
In 2012 the company spun off its drug-discovery business as a US-listed entity, Prothena. A year previously it had sold its Athlone-based drug technologies manufacturing business to US group Alkermes for over $950 million. Last month Elan sold the last of the 31.9 million shares in Alkermes it had received as part of that deal. - Additional reporting: Copyright The Financial Times Limited 2013, agencies
