With gift unknown

13 May 2013 By Robert Cyran Follow @rob_cyran

Finance firm Royalty Pharma is offering $5.7 bln to buy Elan, which just announced a $1 bln deal to buy a chunk of royalties that Theravance receives from Glaxo. Confused yet? Blame low rates and Big Pharma’s risk aversion for fertilizing M&A bankers’ creative schemes.

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On May 13 Elan announced it had agreed to pay $1 billion for 21 percent of the royalties Theravance will receive from GlaxoSmithKline on four respiratory drugs developed by the biotech. Theravance’s market value prior to the transaction was about $3.8 billion.
One of the drugs, Breo for chronic obstructive pulmonary disease, was approved by the U.S. Food and Drug Administration on May 10. GSK will pay a 15 percent royalty rate on the first $3 billion annual global net sales, and 5 percent of net sales above that. The other potential therapies are either awaiting approval or in testing.
On April 25, Theravance announced it would split into two companies: Royalty Management and Theravance Biopharma. The first would hold late-stage respiratory programs and focus on returning capital to shareholders. The second would focus on research programs for various diseases.
Elan is currently the subject of a $5.7 billion, or $11.25-a-share, tender offer from financial firm Royalty Pharma. Elan denied Royalty’s bid played any part in its decision to enter an agreement with Theravance.

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