Elan’s $1bn stake in Theravance respiratory royalties

Elan Corporation has agreed to pay a one-time fee of US $1 billion for a 21% stake in Theravance's future royalty payments related to four respiratory programs. The Irish drugmaker is seeking to diversify its neureological focus after it sold a 50% share in its multiple sclerosis treatment Tysabri to US partner Biogen back in February 2013.

These four respiratory drugs are currently being developed in partnership with GlaxoSmithKline. One is a new treatment for chronic obstructive pulmonary disease (COPD) called Breo (or Relvar outside of the US), which was approved by the U.S. Food and Drug Administration on Friday.

"We are very excited to partner with Elan in a transaction that recognizes the significant value of four programs from our GSK collaborations targeted at respiratory disease. This agreement complements our strategy to facilitate and accelerate the return of capital to our stockholders and build value, consistent with our recently announced plan to separate Theravance into two entities, Royalty Management Company and Theravance Biopharma."

Rick E Winningham, Theravance's Chief Executive Officer.

Elan has recently been at the centre of controversy after a hostile bid was made by Royalty Pharma to acquire the company for US $5.7 billion. While the new Theravance deal has been seen by some analysts as a tactic to spurn the Royalty bid, Elan's CEO Kelly Martin has stated that this link is "irrelevant" and that the transaction was an "important next step in the implementation of [Elan's] strategy".

"It is, however, only one piece of the equation and to that end, we intend to make further announcements regarding other assets and specific opportunities in the near future."

Kelly Martin, Chief Executive Officer of Elan added.

Elan shareholders have until May 31 to make up their minds on Royalty Pharma's $11.25 per share bid.