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M&A

HOW WE WORK IN M&A AND BUSINESS DEVELOPMENT TRANSACTIONS

OVERVIEW & BENEFITS

I. ROYALTY PHARMA can play many roles in biopharmaceutical acquisitions and in-licensing transactions.

II. THE CAPITAL-INTENSIVE nature of drug development means that many companies are a hybrid of:

1. Fully owned strategic assets.
2. Passive financial interests in the form of royalties or profit sharing arrangements tied to prior out-licensing or partnership transactions.

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III. WHILE WHOLLY-OWNED strategic assets tend to drive M&A transactions, acquirers often find themselves dedicating valuable capital and time to passive royalties that do not create value. This is an obvious capital inefficiency.

IV. ROYALTY PHARMA is the ideal partner for the acquisition of these hybrid companies: we acquire the passive royalties while our partner acquires the strategic assets. Thus, each asset finds an optimal buyer, enhancing our partner’s capital efficiency and competitive position in M&A processes.

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V. OUR ROLE in M&A is not limited to pre-existing royalty assets. Royalty Pharma can provide upfront capital for an economic interest in acquired commercial or development-stage programs. Royalty Pharma can partner to support the subsequent R&D investment required for newly in-licensed or acquired programs.

Royalty Pharma’s track record and extensive experience allows us to work efficiently within fluid deal timelines.

Case Study

M&A
Furiex and Forest: Partnering with Royalty Pharma to Preserve Capital for Strategic Initiatives

PARTNER: In 2014, Forest Labs (now Allergan, Plc) acquired Furiex Pharmaceuticals for total upfront consideration of $1.1 billion plus a Contingent Value Rights worth up to $360 million. Furiex was composed of two major assets: the highly-strategic approval-ready Viberzi (eluxadoline) for irritable bowel syndrome; and a non-core passive royalty in Takeda’s Nesina (alogliptin) for diabetes.

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TRANSACTION: In a contemporaneous transaction, Forest Labs agreed to sell two royalties to Royalty Pharma for $415 million in cash (a royalty on Takeda’s Nesina and a smaller royalty on Menarini’s Priligy).

RATIONALE: Royalty Pharma’s partnership with Forest Labs is a model for optimization of biopharma M&A, because it maximizes value for both the buyer and seller in a competitive M&A process. With its strong GI franchise, Forest Labs was the best-positioned strategic acquirer of eluxadoline, while Royalty Pharma is the optimal buyer of passive royalty assets, focusing Forest’s valuable capital on the strategic, value-creating asset.

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“Our partnership with Royalty Pharma will allow us to expand our GI franchise in a capital-efficient manner, preserving Forest’s capital to be deployed to areas which are core to Forest.”
Brent Saunders, Chief Executive Officer of Forest