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Biogen Idec Pays Elan $3.25B for Tysabri Rights, Plus Hefty Royalties

By Randy Osborne
Staff Writer

The once-troubled multiple sclerosis (MS) therapy Tysabri (natalizumab) put a $3.25 billion jackpot into the coffers for Elan Corp. plc, in a deal whereby partner Biogen Idec Inc. is buying all rights. Elan, which originated the monoclonal antibody, will keep getting hefty royalties.

For the first 12 months after the agreement is signed, the Irish company will collect 12 percent of Tysabri sales, after which the amount goes to 18 percent of sales up to $2 billion and 25 percent of sales over that amount. (In 2014 only, the $2 billion threshold will be pro-rated for the portion of 2014 remaining after the first 12 months expires.)

The blockbuster has been steadily gaining ground, and sold $1.6 billion last year, up 8 percent from the year before, with Biogen recording $1.1 billion. In the fourth quarter of 2012, sales jumped 14 percent over the same period the year before, totaling $433 million for the quarter, with Biogen getting $295 million in revenue from that amount.

Biogen Idec said the deal will start making money for the firm right away, with 20 to 30 cents accretive to 2013 GAAP earnings per share, and 50 to 60 cents accretive to non-GAAP numbers.

Tysabri’s road has been anything but smooth. Approved in 2004, the infused alpha-4 integrin inhibitor was yanked from the market the following year, because of its link with progressive multifocal leukoencephalopathy (PML), a deadly type of brain infection. Biogen and Elan, which shared a 50/50 responsibility for the compound, were able to persuade the FDA to allow sales to restart in 2006. The label was amended in 2009 to reflect PML risk, noting that the occurrence of PML in patients treated for 24 to 36 months is generally similar to the 1-in-1,000 rate seen in clinical trials.

The PML storm is over, and profits are raining down. Part of the credit for more than 7,700 new patients starting Tysabri over the past year goes to a test for the JC virus, which has been associated with PML, and Weston, Mass.-based Biogen's CEO George Scangos, called the latest move “a natural next step” for his company. He said he expects a “smooth transition” to the closing of the deal, probably by the end of the second quarter. Officials from both firms had slated a conference call for this morning to further discuss the agreement, which has been cleared by both boards of directors.

Also in the works at Biogen: an eagerly awaited oral drug for MS, called Tecfidera (dimethyl fumarate), previously known as BG-12. Based on data from the Phase III DEFINE and CONFIRM studies showing reductions in MS disease activity along with favorable safety and tolerability, Biogen asked for FDA approval and expects it to happen in late March, with a launch likely in the second quarter. The drug is expected to launch in the second half of this year in the European Union.

Guggenheim analyst Bret Holley predicted in a research report that the new therapy will be “overwhelmingly successful,” though Wells Fargo analyst Brian Abrahams was skeptical and “neutral going into the BG-12 approval/launch, given expectations that may be difficult to dramatically exceed.”

For now, though, all eyes are on the Tysabri deal, with detail and commentary to emerge as the day unfolds.

See Thursday's BioWorld Today for More on This Story.