Tuesday, April 03, 2007

Everybody Plays, Everybody Wins

Theravance's November 2002 deal with GSK around long-acting beta agonists (the heart of GSK's blockbuster Advair franchise) was designed to foster cooperation and trust between the partners. The two companies' assets were pooled--in this case four molecules from each side--and a potential conflict of interest was avoided: no matter which of the eight LABA candidates was chosen as GSK's best bet, Theravance would get paid (though the economics were slightly different, depending).

For Theravance, it was a smart move. Yesterday the companies announced results from two Phase IIb trials for two once-daily LABAs, one from each company's stable, and GSK's 642444 came out on top.

As a result, Theravance (whose 159797 candidate also posted positive results in Phase IIb) will have to pay an undisclosed milestone to GSK upon '444's approval. As we wrote at the time, this eventuality was built into the deal: royalties paid to Theravance are solid (an estimated 13% of the first $4 billion in sales of the LABA alone and the LABA/corticosteroid combo product--the Beyond Advair program--and 9% on sales over $4 billion) and should allow the biotech to establish a line of credit without too much trouble.

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