Firm has also been freed from $235 million in fees to the stockholders related to achieving approval and sales targets.

For a one-time $115 million payment, Valeant Pharmaceuticals is buying out income rights associated with all out-licensed and pipeline products. Former stockholders of Dow Pharmaceutical Sciences have also agreed to release Valeant from up to $235 million in milestone obligations.

In December 2008, Valeant acquired Dow Pharmaceutical Sciences for $285 million and agreed to pay additional fees based on regulatory and commercial success. At the time the dollar amount of the milestones was not revealed. Valeant did report that revenues for Dow were roughly $45 million annually, of which about $20 million came from royalties from products already out-licensed by Dow.

In the short-term the new arrangement serves to offset erosion from ribavirin royalties, explains J. Michael Pearson, chairman and CEO. Ribavarin along with interferon is used to treat hepatitis C. The company made $59.4 million in royalties related to ribavirin during 2008. The first six months of this year pulled in $25.82 million, a 6.35% drop from the same period last year.

“In the longer-term we could avoid considerable future milestone obligations that would be incurred if we successfully commercialize our dermatology compounds acquired from Dow,” Pearson continues. “After reviewing phase II results on three of our dermatology compounds and meeting with the FDA this past summer, we believe these compounds have strong potential for future success.

“We can now turn our efforts to moving these compounds into Phase III studies and continuing to focus on building a strong dermatology franchise,” notes Pearson. Valeant reported $345.62 million in cash and cash equivalents at the end of the second quarter.

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