Perrigo to sell Tysabri royalty stream to Royalty Pharma for up to $2.85 billion

Perrigo announced Monday that it signed a definitive agreement to divest its rights to the royalty stream from global net sales of the multiple sclerosis drug Tysabri (natalizumab) to Royalty Pharma in a deal worth as much as $2.85 billion. Shares in Perrigo declined more than 9 percent on the news. John Hendrickson, chief executive at Perrigo, stated that the agreement stems from his company's review of strategic alternatives for the Tysabri royalty stream announced last November. 

Perrigo acquired rights to the Tysabri royalty stream via its 2013 purchase of Elan, which had previously sold its interest in the drug to partner Biogen, but had the retained royalty rights. 

Under the terms of the latest agreement, Perrigo will receive a cash payment of $2.2 billion from Royalty Pharma upon closing, which is expected within 30 business days. The drugmaker will also be eligible for $250 million in milestones if royalties earned on global net Tysabri sales reach pre-specified thresholds in 2018, as well as for $400 million in additional payments if royalty targets are achieved in 2020. Further, Perrigo will provide Royalty Pharma certain information and audit rights under its current agreement with Biogen.

"While dilutive to adjusted [earnings per share], 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," commented Hendrickson. He added that "this transaction also furthers our stated strategy to enhance our portfolio and focus on our consumer-facing and Rx businesses."