Health Care Deal News: Spotlight on Pharmaceuticals- April 2012

GlaxoSmithKline continues the sell-off of its generic drugs. In March, it announced selling a portfolio of European over-the-counter drugs to Belgium’s Omega Pharma for approximately $612.0 million. The portfolio includes Solpadeine (pain), Zantac (stomach acid) and Beconase (hay fever), as well as vitamin and feminine hygiene lines. Included in the deal is a manufacturing site in Herrenberg, Germany. The buyer believes this acquisition, valued at 2.1x revenue, will give it critical mass in Germany, Britain, Poland and Italy. Omega Pharma stands just below the top tier of consumer health companies, and wants to grow into their ranks.

Eye care specialist Bausch + Lomb, a Warburg Pincus portfolio company, has snagged ISTA Pharmaceuticals (NASDAQ: ISTA) after Valeant Pharmaceuticals International (NYSE: VRX) dropped its hostile bid in January. Bausch + Lomb is offering to pay $9.10 per share in cash, or approximately $500.0 million. This bid offers ISTA shareholders a 9% premium to the stock’s prior-day price, but a 134% premium to the price before VRX made its $6.50 per share bid in December 2011. The current deal is valued at 3.1x revenue. ISTA sells Istalol for intraocular pressure and Bromday for issues associated with cataract extraction; these will now be marketed through the buyer’s well-developed sales channels. Goldman Sachs and Greenhill & Co. provided the buyer and the target, respectively, with financial advice on this deal.

In the meanwhile, Valeant has found other deals to satisfy its hunger. During March, it made two strategically linked acquisitions. First, it acquired a portfolio of generic drugs from the Austrian firm Gerot Lannach. About 90% of their sales are in Russia, with a strong presence in other CIS countries. The portfolio generated net revenue of $55.0 million in 2011. Under terms of the deal, VRX paid an upfront price of less than 3.0x revenue, and committed to an additional $20.0 million in performance-based milestones. We have thus estimated the total purchase price at about $170.0 million. As part of this deal, VRX also signed a 10-year exclusive supply agreement for the acquired products and the opportunity for VRX to introduce additional Gerot Lannach products into VRX territories that Gerot does not currently serve.

In the second, related deal, VRX acquired Natur Produkt, a Russian manufacturer of over-the-counter pharmaceuticals and supplements, for $180.0 million. In 2011, the target generated revenue of about $65.0 million. This acquisition expands the buyer’s business in Russia. VRX believes that it can use Natur Produkt’s established distribution chain to sell the portfolio of branded generics it acquired from Gerot Lannach, as well. With Natur Produkt’s expected double-digit growth and the Gerot portfolio, VRX believes that its pro forma revenue from Russia will be $175.0 million by the end of 2012.......Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today