Elanco sells royalty, milestone rights for Xdemvy to Blackstone for $295M

Elanco (ELAN) announced the sale of certain future tiered royalties and commercial milestones associated with Xdemvy 0.25%, for the human health application of lotilaner, to funds affiliated with Blackstone Life Sciences and Blackstone Credit & Insurance (BX) for $295M in cash. Monetization of this non-core asset will be used to accelerate debt reduction, positioning Elanco to achieve an expected net leverage ratio of 3.9x to 4.3x adjusted EBITDA by the end of 2025. Elanco will repay portions of its outstanding term loans on a pro-rata basis, which is expected to reduce interest expense by approximately $10M, offset by the sale of approximately $10M of royalties based on Elanco’s initial 2025 guidance. In 2019, Elanco exclusively licensed lotilaner to Tarsus Pharmaceuticals (TARS) for exploration as a solution to several unmet human health needs. In 2023, Xdemvy became the first lotilaner-based product approved for human use and the only FDA-approved medicine for treatment of Demodex blepharitis, a common eyelid disease in humans caused by Demodex mites. The agreement applies to certain tiered royalties associated with the U.S. net sales of Xdemvy from April through August 2033 and certain commercial milestones. Elanco retains the rights to all royalty payments on net sales outside the U.S. as well as any future human applications of lotilaner beyond ophthalmic solutions.