Royalty Pharma invests $525M in Sanofi MS drug startup

Royalty Pharma has struck a substantial deal with ImmuNext, a biotechnology startup, to the tune of $525 million. This agreement grants Royalty Pharma the rights to both royalties and milestone payments from an autoimmune disease drug that ImmuNext licensed to Sanofi. Sanofi initially acquired this medication from ImmuNext in 2017 and committed to milestone payments of up to $500 million, along with tiered royalties based on potential sales.

The drug in question, known as frexalimab, showed promise in a mid-stage study focusing on patients with relapsing multiple sclerosis, which led Sanofi to advance it to a Phase 3 trial. Royalty Pharma is positioned to receive significant milestone payments from Sanofi and all royalties on up to $2 billion in global sales of frexalimab. For sales exceeding this threshold, a portion of the royalties will be shared with ImmuNext shareholders. The royalties range from high single to low double digits.

Adding frexalimab to Royalty Pharma's portfolio brings their total to 15 experimental therapies with the potential to generate over $1 billion in peak annual royalties. This is in addition to the cash flow from already approved and marketed products, such as GSK's asthma treatment Trelegy and Roche's spinal muscular atrophy medication Evrysdi.

Frexalimab, previously known as INX-021, was initially envisioned by ImmuNext and Sanofi in 2017 as a treatment for a variety of diseases. Over the years, Sanofi has experienced both successes and setbacks with this drug. Just last month, Sanofi halted the development of frexalimab for Sjögren's Syndrome due to underwhelming study results. However, research continues for other conditions, including two forms of multiple sclerosis (MS), Type 1 diabetes, and lupus. Among these, the MS indication is progressing the fastest. In February, mid-stage study results were published in The New England Journal of Medicine, and Sanofi has plans to seek approval for the drug by 2027. The company has projected that frexalimab could achieve annual sales exceeding 5 billion euros, approximately $5.4 billion. Royalty Pharma anticipates that frexalimab will generate royalties until 2041.

Royalty Pharma has been actively expanding its portfolio through various strategic deals. Last October, the company acquired a larger share of royalties on Evrysdi. Prior to that, it entered the gene therapy market by agreeing to pay $300 million for a 5% royalty on a cancer treatment developed by Ferring Pharmaceuticals. Most recently, in March 2023, Royalty Pharma purchased a portion of the royalty rights to Karuna Therapeutics' experimental schizophrenia medication.

Royalty Pharma's continuous investment in acquiring royalties and milestone payments across different therapeutic areas underscores its strategy to build a diversified portfolio with high revenue potential. With frexalimab's promising outlook, this latest acquisition reinforces Royalty Pharma's position in the biopharmaceutical royalty sector.