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Elan paying Theravance for respiratory royalties

May 14, 2013 12:26 AM UTC

Theravance Inc. (NASDAQ:THRX) gained $6.26 (18%) to $41.20 on Monday after Elan Corp. plc (NYSE:ELN) said it will pay $1 billion in cash in exchange for a 21% interest in the royalties Theravance is eligible to receive from partner GlaxoSmithKline plc (LSE:GSK; NYSE:GSK) for four respiratory programs. The programs are: Breo/ Relvar Ellipta fluticasone furoate/vilanterol, which is approved in the U.S. and under review in the EU; Anoro Ellipta umeclidinium bromide/vilanterol, which is under review in Japan, Europe and in the U.S.; GSK961081, which is slated to start Phase III testing for chronic obstructive pulmonary disease (COPD) this year; and vilanterol monotherapy, which is in Phase III testing. The deal is subject to Elan shareholder approval and is expected to close in June. Elan, which was off $0.17 to $11.61 on Monday, said it will issue a biannual dividend worth 20% of the royalties it receives from Theravance.

Theravance is eligible for 15% royalties from GSK on the first $3 billion in combined annual global net sales of Breo Ellipta and vilanterol monotherapy, and 5% royalties on sales above $3 billion. Theravance is also eligible for tiered royalties up to 10% for Anoro Ellipta, as well as royalties of 10-20% on the first $3.5 billion of annual global net sales of GSK961081 and 7.5% royalties on sales above $3.5 billion. Breo Ellipta is a fixed-dose combination of an inhaled corticosteroid and vilanterol, a long-acting adrenergic receptor beta 2 agonist (LABA), while Anoro Ellipta is a fixed-dose inhaled dry powder formulation of a long-acting muscarinic antagonist (LAMA) and vilanterol, both administered with the dry powder Ellipta inhaler. GSK961081 is a bifunctional muscarinic receptor antagonist and beta 2 agonist (MABA). ...