NU Considers Auctioning Of Lyrica Royalties

Dan Fletcher

By Dan FletcherThe Daily Northwestern

University President Henry Bienen said Northwestern is considering selling a third of the royalties the university receives from Lyrica, a pharmaceutical drug developed by an NU professor that earned more than $1 billion for Pfizer in 2006.

NU’s share of the chronic nerve pain treatment’s revenue will be sold in an auction “if the price is right,” Bienen said, adding that the process will likely be completed before Fall Quarter.

“We’ll set a reserve price at which we are willing to sell and obviously that price will be secret,” Bienen said.

He said if bidding does not reach that level, the university has no obligation to sell.

Bienen did not say how much he expected the shares to earn if sold.

NU earns six percent of the drug’s revenues, which equaled about $72 million in 2006.

Lyrica was developed by chemistry Prof. Richard Silverman in 1989 and has been available in the U.S. since September 2005.

Silverman also receives a portion of the drug’s revenues.

Bienen said NU is looking to sell part of its royalties in order to protect itself from risk. He said a number of factors can negatively affect a drug’s performance on the market, including unforeseen side effects and competition from other drugs.

“This is a drug that has thousands and thousands of users that have had no problems with it, but you can never be sure,” Bienen said.

NU has been evaluating whether to sell for more than six months now, Bienen said. He consulted with the Board of Directors and a number of committees before looking to auction, he said.

“It’s accurate to say that there are different views (on the sale),” Bienen said.

Economics Prof. Martin Zelder said NU faces a tough decision when trying to sell Lyrica.

“It’s a valuable asset, but its value is uncertain,” he said. “Its performance could fluctuate greatly.”

Zelder said there are advantages to both holding onto the royalties and selling them.

“By getting a lump sum now, you can ensure against the risk that Lyrica doesn’t sell,” he said. “But you’re also exposing yourself to the risk that the drug may sell even better after you sell it.”

Bienen said he considered selling when the university first started collecting its royalties, but said the administration decided to wait.

“At that time, I wasn’t happy with the price that was estimated,” he said.

Bienen said the university has benefited from not selling the drug early on, since Lyrica has exceeded first expectations.

If some of the shares are sold, NU will likely invest most of the funds in its endowment, he said.

“If you put the funds in endowment, you may actually have a chance to increase your investment through earnings in those funds,” Bienen said. “Our endowment has done very well lately.”

However, Bienen said a “modest” amount may be put towards further renovations at Norris University Center and construction of a new music building.

“We don’t want to use all our Lyrica money for buildings,” he said. “Some people would want us to start building all over with Lyrica money, but we aren’t going to do that.”

Bienen said Silverman’s share of the proceeds will not be affected by any potential sale.

Silverman, who recently donated a portion of his royalties from the drug to help fund the $100-million construction of a new building that will bring together engineering, biology and chemistry, said he has no plans to sell his shares at this time.

Bienen said the university’s idea is not unprecedented.

In 2005, Emory University sold its share of the proceeds for the HIV drug Emtriva for $525 million.

In 2001, Yale University sold a portion of its share of the AIDS treatment Zerit for $115 million.

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