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August 2011
by Kimberley Sirk  |  Email the author
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TOKYO—Astellas Pharma Inc. announced at the end of June the sale of its Prosidion patent estate and associated royalty stream relating to the use of dipeptidyl peptidase IV (DPP-IV) inhibitors for the treatment of type 2 diabetes to Royalty Pharma.
 
Company officials say the transaction was worth $609 million in cash. Astellas is Japan's second-largest pharma company and is said to be recalibrating its long-term focus to concentrate on cancer, transplantation, immunization and urology.
 
Last year, the company bought U.S. biotechnology firm OSI Pharmaceuticals for $4 billion to boost its cancer business. From that deal, Astellas gained the license for lung cancer drug Tarceva and several drug candidates. The company says it now has 15 cancer drug candidates in its development pipeline.
 
Royalty Pharma is adept at acquiring royalty interests in marketed and late-stage biopharmaceutical products. The company's $6 billion in assets under management includes royalty interests in an eye-opening number of blockbuster products. Included in that line-up are Abbott 's Humira; Johnson & Johnson's Remicade; Gilead's Atripla, Truvada and Emtriva; Pfizer's Lyrica; Amgen's Neupogen and Neulasta; and Genentech's Rituxan. Its centerpiece royalty acquisition is said to be Humira.
 
Pablo Legorreta, CEO of Royalty Pharma, said in a prepared statement that Royalty Pharma's goal is to be a financial partner to large biopharmaceutical companies that hold significant passive royalty assets, but seek to expand their product pipelines by acquiring biotech and other life sciences companies.
 
"By partnering with Royalty Pharma," Legorreta said, "acquirers can reduce the amount of capital spent to acquire strategic, value-creating assets and, in doing so, preserve capital to fund other strategic acquisitions or its internal pipeline. The DPP-IV royalties are very high-quality assets that will be an excellent addition to our diversified portfolio of leading biopharmaceutical royalties."
 
After the sale to Royalty, Astellas kept the momentum going into mid-July by signing a global licensing agreement with Vical Inc. That pact will serve to develop and commercialize TransVax, a vaccine that is poised to enter Phase III trials to test the compound's ability to prevent a potentially fatal virus in stem cell transplant patients.
 
Under the terms of the Astellas sale agreement, Royalty Pharma will be entitled to receive all royalty payments and milestones related to the DPP-IV asset. Royalty Pharma will also take over administration of the DPP-IV patent estate owned by Prosidion.
 
Yoshihiko Hatanaka, president and CEO of Astellas, said in a statement that the sale furthers his company's strategic goals and unloads an asset not related to that vision.
 
"The sale of this large, passive, non-core financial asset will free up capital for reinvestment in strategic initiatives," he said. "We are pleased to have been able to work with Royalty Pharma in this important transaction."
 
In addition to the patent estate and associated royalty stream, Prosidion's assets include two drug candidates in development for diabetes and obesity and research and development capabilities. Those two potential pharmaceutical products might be the next Astellas assets to sport "for sale" signs, as the company indicated that it "will continue to review strategic alternatives for these assets." It added that the range of alternatives to be assessed could include minority investment or strategic alliance, a merger or sale of some or all of these assets.
 
In July 2004, Prosidion acquired a portfolio of medical-use patents related to DPP-IV inhibitors for the treatment of type 2 diabetes. A number of non-exclusive licenses to these patents have been granted to pharmaceutical companies around the world.
 
In a release, Astellas representatives said the company does not plan to divulge additional information about the status of the review of alternatives until a definitive agreement is entered into or the process is completed. At press time, the deal was due to close in July.
 
Code: E081102

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