Date: 2013-04-02
Type of information: Collaboration agreement
Compound: Tysabri® (natalizumab)
Company: BiogenIdec (USA) Elan (Ireland)
Therapeutic area: Autoimmune diseases - Neurodegenerative diseases
Type agreement: collaboration
Action mechanism:
Disease: multiple sclerosis
Details: Elan and Biogen have restructured their Tysabri® collaboration. Biogen Idec has agreed to purchase Elan’s interest in Tysabri® (natalizumab) and upon closing will gain full strategic, commercial and decision-making rights to Tysabri®. Upon the closing of the transaction, the previous collaboration agreement between the companies, whereby worldwide Tysabri® profits were split 50/50, will be terminated along with the agreement’s change of control provisions. Under the terms of the agreement, Biogen Idec will use its existing cash reserves to make a payment of $3.25 billion to Elan upon the closing of the transaction and make future contingent payments to Elan in an amount equal to 12% of global net sales of Tysabri® for the first twelve months, and thereafter, Biogen Idec will continue to make contingent payments of 18% on annual global net sales of Tysabri® up to $2.0 billion and 25% on annual global net sales that exceed $2.0 billion. In 2014 only, the $2.0 billion threshold will be pro-rated for the portion of 2014 remaining after the first 12 months expires. Biogen Idec anticipates the transaction will be approximately $0.20 to $0.30 accretive to 2013 GAAP earnings per share and $0.50 to $0.60 accretive to non-GAAP earnings per share, and will continue to be accretive thereafter, depending on the sales trajectory of Tysabri®. The transaction has been approved by the boards of directors of both companies and is subject to the customary review process under the Hart–Scott–Rodino Antitrust Improvements Act in the United States and other customary review processes. The transaction is expected to close by the end of the second quarter, assuming a standard regulatory approval timeframe. Centerview Partners LLC is acting as exclusive financial advisor to Biogen Idec. Ropes & Gray LLP is acting as legal counsel to Biogen Idec. The initial agreement has been concluded in 2000.
Financial terms: Under the terms of the agreement, Elan will move from the current 50:50 business collaboration to an upfront payment of $3.25 billion and a double digit tiered royalty structure for the complete asset.
• Up front cash payment of $3.25 billion to Elan
• First 12 months: royalty of 12% of Tysabri global net sales (all indications)
• Tiered royalty structure after 12 months
• 18% on up to $2 billion of global net sales (all indications)
• 25% on over $2 billion of global net sales (all indications)
Latest news: * On April 2, 2013, Elan has announced the closing of the Tysabri® (natalizumab) collaboration transaction with Biogen Idec. The agreement was announced on February 6, 2013. Under the terms of the agreement, Elan has received $3.25 billion in cash and will receive double digit tiered royalty payments, on all indications, for the life of the complete Tysabri® asset. For the first twelve months Elan will receive 12% royalties on in-market sales of Tysabri®, and thereafter, Elan will receive 18% royalties on in-market sales up to $2 billion and 25% royalties on in-market sales exceeding $2 billion. As a result of the termination of the collaboration, Tysabri® will be marketed and distributed solely by Biogen Idec.
* On February 22, 2013, Elan Corporation has provided an update to the market post the February 6, 2013 announcement regarding the restructuring of the Tysabri® collaboration with Biogen Idec. As previously announced, under the terms of this agreement, Elan will move from the current 50:50 business collaboration to an upfront payment of $3.25 billion and a double digit tiered royalty structure for the life of the complete Tysabri® asset.
Upon the closing of the Tysabri transaction Elan will, in accordance with applicable law and regulation (including by obtaining any required consents or approvals), execute along three dimensions:
I. Strategic Initiatives: A portion of the $ 3.25 billion will be invested into a variety of business assets. From a portfolio point of view, these assets will, characteristically, diversify Elan from a product, science/clinical, therapeutic, and geographic point of view. Elan expects to be in a position to announce a number of strategic transactions upon or following the close of the Tysabri® restructuring.
II. Debt Refinancing: Following closing of the Tysabri® transaction, Elan will refinance its outstanding debt. Details regarding the refinancing will be made public following the close of the Tysabri® restructuring.
III. Share Repurchase: Following closing, Elan will institute a share repurchase program by utilizing $1 billion of the upfront proceeds from the Tysabri® restructuring, with the method to be detailed following the transaction closing. This enables a significant portion of the unlocked value of Tysabri® to be returned to shareholders directly. Additionally, and as outlined previously, the upfront cash payment to Elan will have little to no tax burden and part of our objective is to enable shareholders to benefit directly from that structural advantage.
