Health Care Deal News: Spotlight on Pharmaceuticals- June 2012

In May’s largest Pharmaceutical transaction, Novartis AG (NYSE: NVS) is buying Fougera Pharmaceuticals, a company based in Melville, New York that manufactures generic skin care medicine, such as drugs for acne, eczema and rosacea. In 2011, Fougera generated revenue of $429.0 million and $173.0 million in EBITDA. The sellers are three private equity firms. NVS is paying $1.525 billion in cash; the deal is valued at 3.6x revenue and 8.8x EBITDA. Under terms of the deal, Fougera is to become part of NVS’s Sandoz generic unit; this acquisition makes the company the largest generic dermatology company in the world with $620.0 million in annual revenue. Fougera was originally part of Nycomed until that company was acquired by Takeda Pharmaceutical Co., at which point Fougera was separated from its parent and came under the control of Nordic Capital, DLJ Merchant Banking and Avista Capital Partners. NVS was advised on this deal by Jefferies; Fougera, by Rothschild and Credit Suisse.

Unison Capital, a Japanese private equity group, is acquiring Showa Yakuhin Kako, a manufacturer of generic drugs and dental equipment based in Tokyo, from Tokio Marine (50% interest), Polaris Capital Group (25%) and PineBridge Investments (25%). The purchase price is approximately $650.0 million. The deal is valued at about 10x EBITDA. Unison Capital is acquiring Show Yakuhin along with GC Corp., a Japanese manufacturer of dental materials. Showa Yakuhin was previously owned by Jafco Co., a Japanese venture capital firm that acquired the company for $316.0 million in 2004. This deal places in the buyer’s portfolio a company with antipyretics and analgesics, which are  used in the treatment of arthritis and cancer-related pain. Others in the auction included Mylan and TPG. Citigroup was hired to advise on the auction.

A number of German pharma companies are caught up in the M&A market. Stada Arzneimittel (DE: STADn) is continuing its search for generic drug makers, after striking out on two potential deals in Russia. However, high leverage will limit Stada’s ability to make deals; its net debt is 3.0x its annual core earnings. That is higher than either Teva Pharmaceuticals or Watson Pharmaceuticals (NYSE: WPI), both of which have recently acquired generic pharma companies: they have corresponding debt multiples of 1.5x and 0.8x, respectively............Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today