GSK’s Trelegy, used to treat patients with asthma and chronic obstructive pulmonary disease, has built a significant following among doctors. Sales grew 37% to 340 million pounds, or roughly $400 million, in the first quarter of this year.
While Theravance is giving up a steady influx of cash from royalty rights to Trelegy, it’s still eligible for future milestone and royalty payments worth as much as $450 million under the deal with Royalty. After paying down debt and accounting for various expenses, Theravance said it expects to have about $430 million in cash.
The rights sale offers a quick boost to shareholders and a cleaner balance sheet for Theravance, Brian Skorney, an analyst at Baird, wrote in a note to investors. Still, the deal means Theravance is losing control over its most valuable asset, Skorney said.
Theravance will now focus on Yupelri, an approved respiratory drug developed with Mylan, and the experimental medicine ampreloxetine, which has stumbled in clinical testing. Though Skorney is skeptical of ampreloxetine’s prospects, he views the investment from Royalty as a vote of confidence.
Theravance and GSK have had a long partnership in drug development that also resulted in an equity relationship. The British drugmaker made several purchases of Theravance shares over the years, owning more than a quarter of the original Theravance Inc. in 2012.
In 2014, Theravance split into two companies, a royalty management company and Theravance, which focused on research and development. The royalty management company, which had traded as Theravance Inc., changed its name to Innoviva in 2016. In 2021, GSK sold all its holdings in Innoviva for $392 million.
With the latest deal, Royalty is essentially reuniting the royalty rights once owned by the original Theravance. Royalty, which raised nearly $2.2 billion in an initial public offering in 2020, has a vast portfolio of royalty rights to marketed therapies, including a number of blockbuster medicines. Recently, it’s done deals with Blueprint Medicines and MorphoSys.