Royalty Pharma to pay $1 billion for Roche’s SMA drug royalties

(Reuters) -Royalty Pharma said on Thursday it has purchased additional royalties on Roche and PTC Therapeutics’ oral spinal muscular atrophy (SMA) drug for an upfront payment of $1 billion.

Risdiplam, branded as Evrysdi, was approved by the U.S. Food and Drug Administration in 2020 for the treatment of the disease in adults and children two months and above.

Spinal muscular atrophy, a leading genetic cause of infant deaths, prevents the body from producing a protein necessary for neuromuscular development.

Royalty Pharma said the agreement with PTC increases its ownership of the Evrysdi royalty from 43% to 81%, equating to a royalty of 6.5% to 13%.

The company had in 2020 purchased about 43% of PTC’s royalty interest in risdiplam for a one-time payment of $650 million.

PTC said it plans to use the proceeds from the deal to pay back its debt from Blackstone Life Sciences and to fund planned operations.

The agreement “removes a significant financial overhang” and resolves investor concerns related to the company’s Blackstone debt obligations, Truist Securities analyst Robyn Karnauskas wrote in a note.

Shares of PTC rose nearly 5% in early trading, while Royalty Pharma was up about 1%.

PTC will also get an option to sell its retained royalties on Evrysdi for up to $500 million at a later date, Royalty Pharma said.

Royalty Pharma expects to fund the transaction with a combination of existing cash and about $350 million from its revolving credit facility.

Evrysdi generated global sales of 1.12 billion Swiss Francs ($1.25 billion) in 2022.

Royalty Pharma buys royalties of future drugs from academic labs and biotechnology companies, which in turn use the cash to fund their research.

($1 = 0.8963 Swiss francs)

(Reporting by Mariam Sunny in Bengaluru; Editing by Shilpi Majumdar)