There are very few positive surprises in drug-company investing. Sure, companies like Dendreon
Repligen's
Repligen will get $5 million up front, plus retroactive tiered royalties that reach as high as 4% on sales of Orencia above $1 billion, annually for six years.
The company is expecting to receive between $7 million and $8 million in royalties in the 15 months before its fiscal year ends in March of next year. In total, Repligen is pegging the royalty payments at around $117 million over the next six years if Orencia sales grow as Repligen estimates they will. It'll have to pay the University of Michigan 15% of its payments -- after subtracting legal costs -- because Repligen licensed the patent from the university.
Repligen has done well at enforcing patents it has licensed from universities. Last year it got ImClone Systems
Repligen might have been able to get a higher royalty rate if it had gone to court, but winning isn't guaranteed and appeals take a long time. The surprise settlement provides guaranteed cash now -- something every drug developer needs.