Valeant Picks Up OraPharma for $312M to Expand into Oral Health
Company will pay $112 million based on meeting certain milestones including revenue targets.!--h2>
Valeant Pharmaceuticals will acquire OraPharma for $312 million up front in a deal that expands the drug developer’s business into the oral health segment. The company will also play another $112 million tied to milestones to Water Street Healthcare Partners, a private equity firm focused exclusively on the healthcare industry. The transaction is set to close this month.
Founded in 1996, privately held OraPharma is headquartered in Horsham, PA, and generated about $95 million in net revenue during the 12 months ending March 31, with growth “at a high single digit rate,” Valeant says.
OraPharma’s lead product Arestin® is a locally administered antibiotic indicated for use in conjunction with scaling and root planing for treatment of adult periodontitis. OraPharma says it currently has the largest specialized pharmaceutical sales force in the dental industry.
“We believe that this market segment has similar characteristics to the dermatology, podiatry, and ophthalmology markets and should offer us the opportunity to cross-sell some of our current products, most notably our new topical prescription cold sore medication, Xerese,” J. Michael Pearson, Valeant’s chairman and CEO, comments. “We believe the OraPharma business is a new growth platform from which to build additional opportunities in the future."
Valeant expects the deal will add to its earnings this year. The company reported a net loss of $12.9 million during the first quarter and a $20 million decline in product sales tied to the strengthening of the U.S. dollar during the first quarter. When the impact of currency changes and acquisitions is subtracted, Valeant said its pro forma organic business growth rose 11%.
The company finished Q1 with total revenue of $856.1 million, up 52% from $565 million a year earlier. However, that included $66.3 million of alliance and royalty revenue from generic versions of Benzaclin and Efudex, through Valeant's acquisition of the U.S. assets of Sanofi dermatology unit Dermik, as well as $36 million related to the out-license of product rights for Cloderm.
OraPharma is the latest of a string of acquisitions by Valeant in recent months. On May 24, the company agreed to acquire undisclosed assets from Swiss Herbal Remedies for less than one times sales, which last year generated C$28 million ($27.3 million).
On May 3, Valeant reported plans to acquire the over-the-counter acne treatment AcneFree and other unspecified assets from University Medical Pharmaceuticals for $64 million plus undisclosed milestone payments based on meeting future revenue targets. That deal at least was double the $32 million in 2011 total revenue generated by the assets and will allow Valeant to expand its skincare offerings, where the company’s leading product is dry-skin treatment CeraVe.
And on April 18, Valeant announced an approximately $71 million deal to buy undisclosed assets from Atlantis Pharma, a Mexican branded generics pharmaceutical company specializing in the gastro, analgesics and anti-inflammatory therapeutic categories. The assets generated a total $26 million in revenue last year. "Atlantis Pharma's well-known brands in Mexico, and the potential to expand our export business to Central America and the Andean region, make this a strong addition to our current operations in Mexico," Pearson said at the time.