We shared in February how Elan’s dismantling had turned it into nothing more than a shell company, holding royalties and revenues but divesting all R&D, product development and commercial activities. Such a model has emerged in the pharmaceutical industry, as a financial hedge on future potential commercialization of products.  Royalty Pharma is most aggressive example of these virtual drug companies that are more hedge fund than healthcare.

Royalty made a run at Elan recently to try and acquire its financial assets.  Kelly Martin, Elan’s CEO, seem less than thrilled with the concept, brushing off the overture as folly.  Now Martin has taken a page out of Royalty’s own playbook acquiring a 21% share of future royalties from Theravance in their partnership with Glaxosmithkline.  Elan will make $1B bet that the respiratory

franchise shared by Theravance and GSK will pan out beyond their investment.  The transaction includes four drugs focused on COPD from their partnership to be developed over the next decade.

The move is the first step (?) in Elan’s strategy to rebrand itself following the sales of its share of MS drug Tysabri to its longtime partner Biogen Idec last year.  Cash rich but with no researchers, pipeline or products to sell, Martin promised a ‘constellation of transactions’ to rebuild its commercial portfolio and revenue streams.   The move had Forbes asking whether Elan purposefully overpaid in the deal to spurn the advances from Royalty Pharma and bring shareholders back to Martin’s side.  Or is Theravance just the first star in the constellation that Martin hopes to illuminate?

BioWorld

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