Biogen Idec said it will pay Elan $3.25 billion plus contingent royalty payments ranging from 18 percent to 25 percent beginning in 2014 to gain full control of their multiple sclerosis drug Tysabri. The deal, expected to close by June, will end their previous equal sharing of global profits and a change of control provision that was part of their original agreement.

“This is a natural next step for Biogen Idec and Tysabri, and it underscores our deep, long-term commitment to improving the lives of MS patients around the world,” says George Scangos, CEO of Biogen Idec. In a conference call following the announcement of the deal, Scangos said the rationale for taking full control was to further strengthen Biogen’s MS franchise, which also includes the injectable drug Avonex and the investigational oral drug Tecfidera, currently under review by the U.S. Food and Drug Administration.

Global sales of Tysabri reached $1.6 billion in 2012 and have been growing at an annual compounded rate of 37 percent over the past five years. Biogen hopes to develop it for other indications such as secondary progressive MS and stroke. Due to the rare possibility of a fatal brain infection, Tysabri is currently recommended only for patients who have tried other therapies that didn’t work for them. Biogen and Elan just recently submitted applications to U.S. and European regulators for permission to market the drug as a first-line therapy, saying they had found a way to identify patients at risk for the brain infection.

When asked if Biogen’s confidence in the potential of Tysabri suggested anything about its confidence in its investigational oral therapy Tecfidera, Scangos said, “Don’t take this confidence in Tysabri as a lack of confidence in any other part of our portfolio.” He said he doesn’t expect the deal to change pipeline priorities.

Biogen will use existing offshore cash reserves to pay for the deal, which is structured as an asset acquisition that comes with significant tax advantages. These include the ability to amortize the purchase, which will save the company about $40 million to $50 million annually. The sales-based contingent royalty payments are also tax-deductable. The deal will be immediately accretive to earnings, says Biogen, and also give it operational synergies and simplify strategic decision-making.

For Elan, the deal provides tax efficient capital and long term cash flow. “The restructuring of this business collaboration provides Elan with significant strategic flexibility,” says Kelly Martin, CEO of Elan. “Our motivation was to diversify and de-risk the company to move forward; and for the patients to continue to benefit from the profound efficacy of Tysabri. The risk of one asset and a single collaborator was not ideal,” he says.