Perrigo to sell royalties of multiple sclerosis drug Tysabri to Royalty Pharma for up to $2.85 bn

Irish drug maker Perrigo Co Plc, yesterday struck a deal to sell the royalty stream from its multiple sclerosis drug Tysabri to privately-held Royalty Pharma for up to $2.85 billion.

Under the terms of the deal, New York-based Royalty Pharma, which buys royalty streams of patented drugs, will pay $2.2 billion at closing, and $250 million if the royalties earned on global net sales of Tysabri meet specified thresholds during 2018 and $400 million if the royalties meet specified thresholds in 2020.

Perrigo will also assign to Royalty Pharma certain information and audit rights under Perrigo's existing agreement with Biogen.

The agreement provides that the transaction will close within 20 business days, subject to a 10 business day extension at Royalty Pharma's option upon Royalty Pharma's making a $1 billion purchase price deposit.  

Tysabri is an US Food and Drug Administration approved treatment for multiple sclerosis.

Perrigo acquired the rights to the Tysabri royalty stream through its 2013 acquisition of Elan Corporation for $8.6 billion.

In 2016, Wall Street analysts projected Tysabri sales at about $2 billion, which will be a year-over-year growth of around 4.7 per cent.

Perrigo CEO John Hendrickson said, "Today's announcement is the result of Perrigo's review of strategic alternatives for the Tysabri royalty stream announced in November 2016. We are pleased to have reached an agreement that maximizes the value of this non-core asset.''

''While dilutive to adjusted EPS, the significant upfront cash component will allow us to de-lever our balance sheet, which supports our investment grade financial policy, and better positions Perrigo to pursue our strategic plan. This transaction also furthers our stated strategy to enhance our portfolio and focus on our consumer-facing and Rx businesses," he added.