PDL BioPharma has paid $240.5m for the rights to royalty and milestones payable on sales of type 2 diabetes products licensed by Depomed.
Under the deal, PDL will be eligible to receive all royalty and milestone payments until it has received the amount equal to twice the cash payment made to Depomed, with all payments received after then shared equally between PDL and Depomed.
Under the terms of the deal, PDL BioPharm will receive royalties from Santarus for Glumetza (metformin HCL extended-release tablets) sales in the US, from Merck for sales of Janumet XR (sitagliptin and metformin HCL extended-release); and from Janssen Pharmaceutica for potential future development milestones and sales of its investigational fixed-dose combination of Invokana (canagliflozin) and extended-release metformin.
In addition, PDL BioPharm will also receive Depomed’s payments from Boehringer Ingelheim for potential future development milestones and sales of the investigational fixed-dose combinations of drugs and extended-release metformin, subject to Depomed’s licensing agreement with Boehringer Ingelheim. Payments will also be receivedfrom LG Life Sciences and Valeant Pharmaceuticals for sales of extended-release metformin in Korea and Canada respectively.
PDL BioPharma chief executive officer John McLaughlin said: "This acquisition allows PDL to participate in a potentially lengthy, diversified stream of royalties on products in different classes across the diabetes area."
According to PDL, Depomed received $42.8m in royalty payments on Glumetza in 2012, which is a once-daily extended release metformin product approved to treat adults with type 2 diabetes.
PDL will also receive Depomed’s royalties on net sales of Glumetza of 32% for the remaining of 2013 and full year 2014, as well as 34.5% in 2015 and further.
Depomed president and CEO Jim Schoeneck said through this sale of its type 2 diabetes milestone and royalty payments, the company has generated a significant infusion of cash equal to about 55% of its market capitalidation without issuing any equity or incurring any debt.
"We intend to focus our cash balance of over $300m to fund future product acquisitions capable of driving growth into the next decade," Schoeneck said.
PDL will also share proceeds equally with Santarus based on a gross margin split if generic Glumetza is introduced in the US.
In addition, PDL will receive Depomed’s royalties due from Valeant Pharmaceuticals for sales in Canada and from LG Life Sciences for sales in Korea.
Depomed previously granted Merck a licence and other rights to certain patents of metformin extended release technology for Janumet XR, Merck’s fixed-dose combination product for type 2 diabetes containing sitagliptin, an extended release metformin that was approved by the FDA in February 2012.
PDL will now receive Depomed’s very low single digit royalty on Merck’s net sales of Janumet XR in the US and other licensed territories through the expiration of the licensed patents under Depomed’s licensing agreement with Merck.
In addition, PDL will likely receive Depomed’s milestone payments based on regulatory filings and approval events, as well as royalties on worldwide net sales of products sold by Boehringer Ingelheim.
PDL may receive Depomed’s milestone payments and royalties on worldwide net sales of products sold by Janssen under the Depomed licence.
Image: A ball-and-stick model of metformin. Photo: courtesy of Fvasconcellos.
