Investors pocket $761M in deal betting on Biogen's BG-12

Like a lot of biotech investors, Royalty Pharma sees blockbuster potential in Biogen Idec's ($BIIB) experimental BG-12. The New York-based buyer of royalty interests in biopharma products has laid down $761 million for an interest in potential earn-outs to former shareholders of Fumapharm.

Weston MA-based Biogen, the world's largest provider of multiple sclerosis drugs, snapped up Fumapharm in 2006 to acquire BG-12, a potential blockbuster oral MS treatment. The Royalty Pharma deal gives Fumapharm's former shareholders an early reward for their interest in the hottest late-stage drug in Biogen's pipeline and follows two positive Phase III studies of the drug for combatting flare-ups of the autoimmune disease. The success of the program thus far has helped Biogen's shares soar.

Royalty Pharma has made a huge bet on the future of BG-12, which could become the second approved oral drug for treating attacks of the nerve-damaging disease after Novartis' ($NVS) Gilenya. In recent months Biogen Idec has filed for approvals of the drug in the U.S. and Europe, and the biotech giant is gearing up for a major U.S. launch of the MS treatment in 2013. RBC Capital Markets has estimated peak annual sales of BG-12 to hit up to $3 billion. (Royalty is also gaining a stake in the earn-outs tied to a lesser-known drug from Fumapharm called Fumaderm, a treatment used in Germany for plaque psoriasis.) 

"We are pleased to acquire an interest in one of the most promising new therapies addressing the needs of patients with relapsing-remitting multiple sclerosis," Royalty Pharma CEO Pablo Legorreta said. "The combination of efficacy, safety and tolerability of BG-12 shown in the DEFINE and CONFIRM Phase 3 trials, the oral dosing regimen and Biogen Idec's deep commitment to this disease category, leads us to believe that BG-12 has blockbuster potential."

- here's the release