Theravance, Elan enter into royalty participation agreement

As per the terms of the agreement, Elan will purchase a participation interest in potential future royalty payments related to four respiratory programs partnered with GlaxoSmithKline: Relvar Ellipta/Breo Ellipta, Anoro Ellipta, Maba monotherapy and vilanterol (VI)monotherapy.

Elan will make a one-time cash payment of $1.0bn to Theravance in exchange for a 21% participation interest in the potential future royalty payments from the four programs when received by Theravance under the terms of the agreement.

Theravance CEO Rick E Winningham said that agreement complements the company’s strategy to facilitate and accelerate the return of capital to its stockholders and build value, consistent with its recently announced plan to separate Theravance into two entities, Royalty Management Company and Theravance Biopharma.

Elan CEO Mr Kelly Martin said that the transaction, upon closing, will immediately diversify the company’s business with an investment in four high quality and late stage clinical assets within a large and growing therapeutic area.

"In addition, the long term and future potential cash flow streams and net income will be shared with investors both directly – through a dividend pass through – and indirectly through overall after tax earnings," Martin added.

Under the LABA collaboration with GSK, Relvar Ellipta/Breo Ellipta (Fluticasone Furoate (Ff)/Vilanterol (Vi)), Anoro Ellipta (umeclidinium bromide (UMEC)/VI) and VI monotherapy have been developed.

For Relvar Ellipta/Breo Ellipta and VI, Theravance is entitled to receive royalties from GSK of 15% of the first $3bn of combined annual global net sales, and 5% of combined annual global net sales above $3bn.