Elanco Monetizes Royalty Rights; Partners with Blackstone in $295 Million Deal

Deal News | May 05, 2025 | Blackstone

Elanco Animal Health Incorporated announced the sale of future royalties and commercial milestone rights related to XDEMVY (lotilaner ophthalmic solution) for human health to funds affiliated with Blackstone Life Sciences and Blackstone Credit & Insurance, in a deal worth $295 million. This strategic transaction allows Elanco to focus on debt reduction, aiming for a net leverage ratio of 3.9x to 4.3x adjusted EBITDA by end-2025. The sale covers specific royalties and milestones in the U.S., with Elanco retaining rights outside of the country. The transaction highlights the ongoing partnership between Elanco and Blackstone, aiming to capitalize on the high-demand treatment for Demodex blepharitis, an eyelid disease. This move aligns with Elanco’s goal to bolster cash flow and support its core business growth. Concurrently, Blackstone expresses confidence in the potential impact of XDEMVY on the market. The deal is facilitated by Morgan Stanley & Co. LLC as the structuring agent. Cautionary forward-looking statements accompany the announcement, highlighting potential risks and economic conditions that could impact future results.

Sectors

Pharmaceuticals & Biotechnology
Private Equity & Investment Management

Geography

United States – The deal involves U.S. sales royalties for XDEMVY and includes participants like Elanco, Blackstone, and Morgan Stanley, all headquartered or significantly operating within the U.S.

Industry

Pharmaceuticals & Biotechnology – The article involves the sale of pharmaceutical and biotechnology assets related to XDEMVY, an ophthalmic solution used in human health, a key sector for both Elanco and Blackstone.
Private Equity & Investment Management – Blackstone's involvement in purchasing the royalty rights indicates a significant transaction within the private equity and investment sectors, showcasing their role in asset management and investment in pharmaceuticals.

Financials

$295 million – The agreed cash price for the sale of future tiered royalties and commercial milestones associated with XDEMVY.
3.9x to 4.3x adjusted EBITDA – The expected net leverage ratio Elanco aims to achieve by the end of 2025 through debt reduction facilitated by the transaction.
$10 million – Estimated reduction in Elanco's interest expense resulting from debt paydown due to the transaction.

Participants

Name	Role	Type	Description
Elanco Animal Health Incorporated	Selling Company	Company	A global leader in animal health, Elanco sold the royalty rights to focus on debt reduction and core business growth.
Blackstone Life Sciences	Bidding Company	Company	A private investment firm that acquired royalty rights related to XDEMVY, involved in life sciences investments.
Blackstone Credit & Insurance	Bidding Company	Company	Part of Blackstone's platform focusing on credit investments, played a role in acquiring Elanco's royalty rights.
Morgan Stanley & Co. LLC	Structuring Agent	Company	Served as the sole structuring agent for the transaction between Elanco and Blackstone.
Tarsus Pharmaceuticals, Inc.	Other Company	Company	Exclusive licensee of lotilaner from Elanco, responsible for commercializing XDEMVY in human health.