Paul Capital in $115m drug royalty buyout

Paul Royalty Fund, an affiliate of secondary specialist Paul Capital Partners, will acquire the royalty rights to US sales of insomnia drug Estorra in conjunction with the drug’s US launch.

A division of Paul Capital Partners will acquire from pharmaceutical company Aventis the US royalty rights to the drug Estorra as Aventis completes its merger with Sanofi-Synthelabo.

The deal will result in ‘fixed and milestone’ payments of up to $115 million (€94 million) to Aventis following the US launch of Estorra, which is an insomnia drug currently under review by the US Food and Drug Administration.

The Estorra royalties are being purchased by Paul Royalty Fund II, a $650 million vehicle dedicated to acquiring medical and drug royalties. The royalties team is led by two doctors, Walter Famenbaum and Gregory Brown, as well as leveraged finance specialist Lionel Leventhal.

According to a press release, the US market for prescription sleeping products was $1.8 billion in 2003. Insomnia affects more than 50 million Americans.

Last month the US Federal Trade Commission said it would allow Sanofi to buy Aventis for $64 billion provided the companies divest certain assets.

Drug royalty investing has caught on with investors recently as a market where proprietary transactions as purchasers scour corporations, laboratories and entrepreneurs for underappreciated royalty rights.

Former Hicks Muse Tate & Furst founder Charles Tate is currently seeking $300 million for a royalties investment vehicle.