Novartis to acquire Fougera Pharmaceuticals for $1.5 billion

Acquisition to boost dermatological portfolio, make Sandoz number one in generic dermatology medicines

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BASEL, Switzerland—Novartis has announced the signing of adefinitive agreement for the acquisition of Melville, N.Y.-based FougeraPharmaceuticals for $1.525 billion in an all-cash transaction. Fougera, aspecialty dermatology generics firm, is owned by a consortium of private equityfunds led by Avista Capital Partners, Nordic Capital and DLJ Merchant Banking(a Credit Suisse affiliate). The acquisition will befinanced with existing cash resources and cash flow.
"Fougera and Sandoz serve many of the same customers in theU.S., creating significant sales and cost synergies with Sandoz's sizeable USgenerics business," Don DeGolyer, president of Sandoz US, said in a pressrelease. "We welcome the team from Fougera Pharmaceuticals into Sandoz andNovartis."
As a result of the transaction, Sandoz, thegeneric pharmaceuticals division of Novartis, will end up being thenumber-one global company in generic dermatology medicines, based on 2011IMS data. Current estimates foresee that the combined businesses will seeannual global sales of approximately $620 million, primarily in the UnitedStates. In its statement about the transaction, Novartis noted the genericsdermatology market in the United States saw sales of $2.1 billion in 2011, andit has seen consistent double-digit growth in the past few years. A report fromBCC Research on the global dermatological therapeutics market estimates that itwill see a compound annual growth rate of 8.7 percent and reach $38 billion in2013.
The acquisition is expected to be accretive to core earningsper share. Fougera reported net sales of $429 million in 2011, withapproximately 700 employees in its two primary New York sites. The companyoperates two main businesses, which consist of Fougera and PharmaDerm, abranded specialty pharma business with 17 brands. Fougerafocuses on dermatological pharmaceuticals, with a variety of products to treata range of dermatological issues, including acne, eczema, psoriasis, rosacea,dermatitis, actinic keratosis, fungal rash and external genital wards.
"The addition of Fougera's leading portfolio furtherstrengthens Sandoz's differentiated products strategy and improves our abilityto help patients and customers around the world by providing easier access tohigh quality, affordable dermatological medicines," Jeff George, global head ofSandoz, said in a press release. "Fougera brings us valuable technicalcapabilities in the area of topical dermatological products, particularly inthe development and manufacturing of semi-solid forms such as creams andointments."
Zacks Equity Research noted that the acquisition "will placeSandoz in a better position to tap the lucrative dermatology generics market"and will also result in cost synergies. The firm is "positive on the futureprospects of Sandoz, as it enjoys a 50 percent share of the biosimilar marketwhich is expected to grow significantly and reach $15 billion – $20 billion in2020."
The transaction is subject to customary closing conditionsand regulatory approvals, and is expected to close in the second half of thisyear.

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