Notably, Biogen gained full strategic, commercial and operational control over Tysabri. As per the agreement, Elan will be receiving an upfront payment of $3.25 billion from Biogen. For the first year, Biogen will make royalty payment of 12% on the worldwide net sales of Tysabri (for all indications). After the first year, Elan will receive a royalty of 18% on up to $2 billion of global net sales of Tysabri and 25% thereafter on over $2 billion of global net sales of Tysabri.
The current collaboration agreement (profit and loss equally shared) between the companies will be terminated. The transaction is expected to end in the first half of this year.
Elan mentioned in its press release that it expects to invest a portion of the $3.25 billion into multiple business assets. These assets are expected to diversify the company’s portfolio from a product, science/clinical, therapeutic, and geographic point of view. Elan expects to announce a number of strategic transactions this year upon or after the close of the Tysabri restructuring.
Elan also has plans to refinance its outstanding debt. The company is expected to announce details of its refinancing following the closure of Tysabri restructuring.
Moreover, Elan announced that it will institute a share repurchase program by utilizing $1 billion of the upfront proceeds post the restructuring of Tysabri. As a result of the repurchase program a significant portion of the unlocked value of Tysabri will be returned to Elan’s shareholders.
We are impressed with the company’s initiatives post its announcement of Tysabri restructuring. But we still believe that Tysabri is an important product at Elan. We expect Elan to actively pursue more in-licensing deals or acquisitions.
Elan currently carries a Zacks Rank #2 (Buy). Biotech companies such as Alkermes (ALKS), which carries a Zacks #2 Rank (Buy), and United Therapeutics Corporation (UTHR), which carries a Zacks Rank #1 (Strong Buy), too are well positioned.
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