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NYU Sells Portion of Royalty Interest in Remicade to Royalty Pharma for $650M

Fast developing a reputation as a top facilitator of royalty monetization deals for biotech-related, university- or non-profit-owned IP, Royalty Pharma earlier this month acquired an undisclosed portion of New York University’s worldwide royalty interest in the anti-inflammatory Remicade for $650 million.
The deal is the most recent of several such monetizations Royalty Pharma has negotiated with universities or research institutions in the past few years as it provides such entities an option to attain liquidity for their royalty interests and lessen the risk involved in holding royalty rights to a pharmaceutical product.
“The [royalties] on Remicade have been increasing every year, and the projections we’ve seen are that they would continue to increase for a period,” Abram Goldfinger, executive director of the NYU School of Medicine Office of Industrial Liaison/Technology Transfer, told BTW.
“But I think this was a time when the university and medical school have a significant growth agenda, and this was a way to take some of the risk away from being able to fund that growth agenda,” he added. “At this time we were able to get a price that fairly valued [the IP] so that we could eliminate the risk without sacrificing too much.”
Under the terms of the agreement, NYU received $650 million in cash up front plus additional payments should yearly sales of Remicade exceed certain agreed-upon sales hurdles.
The university also retains the portion of the Remicade royalty interest that is payable to the NYU researchers that developed the drug along with Johnson & Johnson subsidiary Centocor in the 1990s.
Further financial details were not disclosed.
The monoclonal antibody against TNF on which the drug is based was developed by NYU researchers Jan Vilcek and Junming Le in collaboration with Centocor, which subsequently licensed and developed the technology. Centocor developed Remicade as a treatment for rheumatoid arthritis, Crohn’s disease, ankylosing spondylitis, psoriatic arthritis, and other inflammatory diseases.
“We are pleased to continue our role as a partner to leading universities, research institutions, hospitals, and biopharmaceutical companies,” Pablo Legorreta, CEO of Royalty Pharma, said in a statement. “By monetizing royalties for sellers such as NYU, we are helping these institutions to continue their core mission of research and education.”
According to NYU, the school generated approximately $109 million in licensing revenue from royalties on sales of Remicade in 2004. However, Remicade generated a total of $2.15 billion in revenues that year, according to Johnson & Johnson; and about $3 billion in revenues in a 12-month period from February 2005 to February 2006, according to pharmaceutical market research firm IMS Global Insights.
Remicade is one of three similar anti-TNFs competing in an estimated $10 billion rheumatoid arthritis market space, according to IMS, and the competition is only going to increase as next-generation, non-TNF-related anti-inflammatories have recently entered the market.
In addition, there is always a great deal of risk for a university holding royalty rights to any pharmaceutical, as the drug could, for example, unexpectedly be pulled from shelves due to safety issues, or quickly lose significant market share to a competing product.
Despite these scenarios, Goldfinger said that its deal with Royalty Pharma was more about reducing general risk, receiving fair compensation in return, and realizing a significant sum of money to realize NYU’s forthcoming development plans.
“There were no specific risks associated with Remicade that we were particularly concerned about, it’s just general risk,” Goldfinger said. “The fact that [Remicade] has been on the market now for eight or nine years, eliminated a lot of the risk for [Royalty Pharma], I think, so that we could now get a price that we felt was not giving up too much. Had we done a deal one or two years [after the drug’s approval], there would have been more risks and that would have been reflected in the valuation.”

“This was a time when the university and medical school have a significant growth agenda, and this was a way to take some of the risk away from being able to fund that growth agenda.”

Essentially, Royalty Pharma is betting that it can realize at least $650 million in revenues from its stake in Remicade in the next few years, although, as previously stated, if the drug clears certain sales hurdles then Royalty will tack on additional undisclosed payments to NYU.
The strategy seems to be working so far for Royalty Pharma, which saw its net income increase to $57.9 million in 2004 (the last year for which financial data is available from the company) from $44.7 million in 2003 and $15.8 million in 2002.
Although it has brokered royalty licensing agreements with small to medium biotechs such as Xoma and Ligand Pharmaceuticals, as well as large pharmas such as AstraZeneca, Royalty has recently shifted its attention toward fishing for royalty rights from universities and non-profit research institutions.
In 2005, Royalty Pharma purchased a portion of Memorial Sloan-Kettering Cancer Center’s royalty interest in Amgen’s Neupogen and Neulasta worldwide for all countries except the United States for $142 million in cash up-front plus a similar “sales hurdle” agreement for future payments.
That same year, Royalty completed an agreement with Emory University in which it acquired the school’s royalty interest for the HIV drug Emtriva for $525 million, a deal that thrust Emory into the licensing revenue leaderboard among US universities in the Association of University Technology Manager’s most recent licensing survey (see BTW 3/5/07).
Along with Bristol-Myers Squibb, Royalty also had a hand in the monetization in 2000 of the royalty stream to Zerit, another HIV drug developed by Yale researchers. That agreement differed significantly from its other university deals, however, in that Royalty Pharma creating a trust that funded the purchase, but now receives royalty payments from Bristol-Myers Squibb, the drug’s current manufacturer.

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