In what could be the biggest windfall of its kind to date, Northwestern University has received $700-million for selling some of its rights to future royalties from a new blockbuster drug. The drug, marketed under the name Lyrica, is used to treat pain associated with fibromyalgia, shingles, and diabetes.
A portion of the payment will go to the inventor, Richard B. Silverman, a professor of chemistry, as well as to the postdoctoral student who worked with him in 1989 to synthesize the organic molecule that became the basis for the drug, which is sold by Pfizer Inc.
The university did not disclose the amount going to Mr. Silverman and Ryszard Andruszkiewicz, his postdoc, who is now a professor in Poland. But under the policy in effect at the time they devised the compound, inventors receive about 25 percent of royalties, after the university takes a cut for its patenting and licensing expenses.
What to Do With a Windfall
Northwestern will put the remainder of the proceeds into its endowment, which was worth about $6.6-billion as of November 30. The new funds will be designated for student aid, start-up costs for university researchers, construction of new buildings and laboratories, and other purposes.
Mr. Silverman said he did not have any particular plans for the money but intended to use it to further his research, which now focuses on symptoms and causes of epilepsy, Parkinson’s disease, and other disorders of the central nervous system. In February the university announced that Mr. Silverman had donated an undisclosed sum toward a new $100-million building for chemistry, biology, and engineering. The money came from his share of the Pfizer royalties from Lyrica. (The building is being named for him and his wife, Barbara.)
The company that bought the rights is Royalty Pharma of New York. The deal entitles it to receive a portion of the royalties on sales of Lyrica that would otherwise have gone to Northwestern.
Even as it sold a portion of its rights, the university continued to retain “a large portion” of its rights to royalties from Lyrica, so it will also continue to receive royalties directly from Pfizer, said Eugene S. Sunshine, Northwestern’s senior vice president for business and finance. He would not disclose what proportion of the rights was sold.
During its first year on the market, in 2006, sales of Lyrica reached about $1.2-billion, and some analysts have estimated they could more than double, to $2.7-billion, by 2012. The drug was approved for use as a treatment for fibromyalgia in June, and the analysts have predicted that sales for that use alone could exceed $1-billion.
NYU Deal May Exceed Northwestern’s in Value
Northwestern’s U.S. patent runs until 2018. The compound is also protected in other countries by foreign patents that extend even longer.
The deal, completed and announced on Tuesday, is believed to be the largest such royalty purchase involving an invention coming out of a university laboratory, although a transaction announced in May by New York University could eventually exceed it. In that deal, NYU received $650-million in cash for its rights to royalties on the drug Remicade, but may eventually receive more if sales exceed certain benchmarks (The Chronicle, May 8). Remicade is used to treat arthritis and other inflammatory diseases.
Royalty Pharma was also the company that acquired the rights in that deal.
Mr. Sunshine said that Northwestern had been considering the sale of royalty rights to Lyrica for more than a year, and that it had received proposals from about 10 companies.
The windfall was not entirely unexpected. In 2004, Northwestern’s president, Henry S. Bienen, noted in his state-of-the-university speech that many people were predicting that the invention could become a “financial bonanza” for the university. And although he noted then that this was hardly a sure thing, he was very mindful of the potential. “Frankly, I hope they’re right,” he said.
They were.
