Theravance, Inc., a privately-held pharmaceutical company, announced today that the strategic alliance with GlaxoSmithKline (GSK), previously announced was consummated and funded after receiving the requisite regulatory and Theravance shareholder approvals. This innovative broad-based strategic alliance will develop and commercialize novel medicines across a variety of important therapeutic areas, including bacterial infection, respiratory, urinary incontinence and gastrointestinal disorders.
Under the terms of the alliance, Theravance received $129 million, a significant part of which relates to GSK's purchase of shares to increase its ownership position in Theravance from approximately 6% to approximately 19%, with an option for a further extension of GSK ownership in 2007. In exchange, GSK receives an exclusive option to license potential new medicines from all current and future programs through August, 2007 on a worldwide basis.
The alliance provides Theravance with a strong global pharmaceutical partner and access to significant capital to continue its drug discovery and development efforts. This alliance also builds on the companies' existing collaboration in respiratory diseases in which a new once-daily treatment for asthma and COPD is currently in Phase 2 clinical trials.
The companies have also agreed to some innovative equity and governance arrangements. GSK's ownership of Theravance may be increased from 19% to up to 60% in 2007 as GSK has the right, at its sole discretion, to acquire ("call") in 2007 half of Theravance's outstanding shares at a significant premium to the price paid by GSK in connection with this transaction.
Alternatively, Theravance's shareholders, other than GSK, have the right to cause GSK to acquire ("put") up to half of their outstanding stock in 2007. The put price is set at a premium to the price paid by GSK in connection with this transaction and guarantees that value on half the outstanding shares for all shareholders who own Theravance stock in 2007. Given the maximum number of shares subject to the put, GSK's maximum obligation would be $525 million. The call and the put will be structured as transactions directly between Theravance and its shareholders and will be funded by GSK at the time of occurrence.
If GSK's ownership increases to more than 50% in 2007 as a result of the call or the put, it will receive a 5-year extension of its exclusive option to Theravance's product portfolio. GSK will also have certain Board and governance rights as long as it maintains its ownership in Theravance above 19%.
In six years, Theravance has applied its unique multivalent small molecule discovery approach to discover seven potential new medicines, currently in active development. In addition to the once-daily treatment for asthma and COPD, these include a treatment for serious infections due to Gram-positive bacteria (currently expected to file in 2006) and a compound in Phase 1 development to treat overactive bladder. Other compounds in earlier development are targeted at the treatment of gastrointestinal disorders, bacterial infections and respiratory disease.
Upon accepting a new program, GSK will be responsible for all development, manufacturing and commercialization activities. Depending on the success of these new programs, Theravance will receive clinical, regulatory and commercial milestone payments and significant royalties on sales of medicines. For successful programs, these milestone payments could range from $162 million to $240 million per program. Under the alliance, Theravance will retain its operational independence to continue discovering and developing new medicines.