(Reuters) - Biogen Inc said on Tuesday it would pay Forward Pharma A/S $1.25 billion to license the Danish company's patents covering multiple sclerosis drugs, providing Biogen an insurance policy on future sales of Tecfidera, its blockbuster oral treatment for the disease.
Biogen and Forward Pharma have been locked in a dispute over the patents for dimethyl fumarate, the key active ingredient in Tecfidera, which had sales of about $4 billion in 2016. While the deal gives Biogen a share of Forward's intellectual property, the legal cases are ongoing.
Forward Pharma, whose shares were up 51 percent, said it was looking to return a substantial portion of its cash windfall to shareholders. It said it was considering both stock buybacks and cash distributions.
The agreement does not resolve ongoing U.S. and E.U. patent disputes between the two companies, Biogen said. The U.S. biotech could still be on the hook for royalty payments on future Tecfidera sales if it loses those challenges.
If Biogen patents on Tecfidera are ruled valid and enforceable the company will owe no future royalty payments.
If a Forward Pharma patent ultimately keeps Tecfidera on the market and free of generic rivals, Biogen said it will pay a 10 percent royalty from 2021 through the end of 2028, and a 20 percent royalty beginning in 2029.
Biogen can still appeal any patent ruling it might lose.
"We believe this agreement will clarify and strengthen our intellectual property for Tecfidera," Biogen's new Chief Executive Michel Vounatsos said in a statement.
Third-quarter Tecfidera sales of $1.03 billion accounted for about a third of Biogen revenue in the period. It is the market leader for oral MS treatments.
Analysts said the agreement removes a major uncertainty that had been hanging over Biogen.
The deal is important in the long term as a patent cliff on Tecfidera could have curbed the company's growth after 2020 and weighed on investors, RBC Capital Markets analyst Michael Yee said.
Forward Pharma shares rose $9.36 to $27.21, while Biogen edged up 48 cents at $285.23.
Reporting Bill Berkrot in New York and Natalie Grover and Ankur Banerjee in Bengaluru; Editing by Ted Kerr and Tom Brown