Health Care Deal News: Spotlight on Pharmaceuticals-Jan. 2012

Prestige Brands (NYSE: PBH) is acquiring a portfolio of 17 OTC pharmaceutical brands from GlaxoSmithKline (NYSE: GSK) for $661.6 million. This acquisition, valued at 3.2x 2010 revenue, raises the buyer’s annual revenue from OTC brands to the range of $500.0 million, and total revenue to about $600.0 million. Among the brands acquired are, Goody’s and Ecotrin pain relievers; Beano, Gaviscon, Tagament and Fiber Choice GI products; and Sominex sleep aid.  Structuring the deal as an asset purchase results in substantial tax benefits, with an effective purchase price of $535.0 million and “real” price to revenue multiple of 2.6x. Sawaya Segalas & Co. provided PBH with financial advice on this transaction.

Valeant Pharmaceuticals (NYSE: VRX) has launched a hostile bid worth $327.0 million for ISTA Pharmaceuticals (NASDAQ: ISTA), which is involved in remedies for diseases and conditions of the eye. VRX will pay $6.50 per share and assume $13.0 million in debt, offering ISTA shareholders a 68% premium to the stock’s prior-day price. VRX made an initial approach in early October, then launched a hostile bid on December 16.

Japan’s Takeda Pharmaceutical Co. (T: 4502) has made an offer to buy Intellikine, a California-based pharma that discovers and develops small molecule drugs with a focus on oncology. The purchase price is $310.0 million, consisting of $190.0 million in an upfront payment and $120.0 million in additional potential clinical milestones. This acquisition enlarges Takeda’s oncology drug pipeline, giving it access to two novel programs that target the PI3K/mTor pathway for the treatment of cancer. Founded in 2007, Intellikine has raised $41.0 million from such investors as Sofinnova Ventures, CMEA Capital, Novartis Venture Funds, Abingworth, U.S. Venture Partners, Fintech Global Capital and Biogen Idec, all of whom should reap healthy returns on their investments. Lazard provided Intellikine with financial advice on this deal.

In a move to strengthen the company’s cash position, Dendreon Corp. (NASDAQ: DNDN) is selling its royalty interest related to intellectual property originally licensed from Schering-Plough (now Merck & Co. [NYSE: MRK]) and associated with Victrelis, a treatment for chronic hepatitis C. Toronto-based CPPIB Credit Investments is paying $125.0 million for those royalties. With the additional cash under its belt, DNDN will be able to invest in its core business. Centerview Partners provided DNDN with financial advice on the transaction.

Upcoming M&A Activity. In the wake of Valeant Pharmaceutical’s acquisition of Dermik, a dermatology unit of Sanofi (NYSE: SNY), and Janssen Pharmaceuticals’ (NYSE: JNJ) Ortho Dermatologics, the FTC has ordered VRX to sell three drugs: Refissa, a generic version of Benzacin and a generic version of Efudex....Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today