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Novartis to acquire Fougera Pharmaceuticals for $1.5 billion
BASEL, Switzerland—Novartis has announced the signing of a definitive agreement for the acquisition of Melville, N.Y.- based Fougera Pharmaceuticals for $1.525 billion in an all-cash transaction. Fougera, a specialty dermatology generics firm, is owned by a consortium of private equity funds led by Avista Capital Partners, Nordic Capital and DLJ Merchant Banking (a Credit Suisse affiliate). The acquisition will be financed with existing cash resources and cash flow.
"Fougera and Sandoz serve many of the same customers in the U.S., creating significant sales and cost synergies with Sandoz's sizeable US generics business," Don DeGolyer, president of Sandoz US, said in a press release. "We welcome the team from Fougera Pharmaceuticals into Sandoz and Novartis."
As a result of the transaction, Sandoz, the generic pharmaceuticals division of Novartis, will end up being the number-one global company in generic dermatology medicines, based on 2011 IMS data. Current estimates foresee that the combined businesses will see annual global sales of approximately $620 million, primarily in the United States. In its statement about the transaction, Novartis noted the generics dermatology market in the United States saw sales of $2.1 billion in 2011, and it has seen consistent double-digit growth in the past few years. A report from BCC Research on the global dermatological therapeutics market estimates that it will see a compound annual growth rate of 8.7 percent and reach $38 billion in 2013.
The acquisition is expected to be accretive to core earnings per share. Fougera reported net sales of $429 million in 2011, with approximately 700 employees in its two primary New York sites. The company operates two main businesses, which consist of Fougera and PharmaDerm, a branded specialty pharma business with 17 brands. Fougera focuses on dermatological pharmaceuticals, with a variety of products to treat a range of dermatological issues, including acne, eczema, psoriasis, rosacea, dermatitis, actinic keratosis, fungal rash and external genital wards.
"The addition of Fougera's leading portfolio further strengthens Sandoz's differentiated products strategy and improves our ability to help patients and customers around the world by providing easier access to high quality, affordable dermatological medicines," Jeff George, global head of Sandoz, said in a press release. "Fougera brings us valuable technical capabilities in the area of topical dermatological products, particularly in the development and manufacturing of semi-solid forms such as creams and ointments."
Zacks Equity Research noted that the acquisition "will place Sandoz in a better position to tap the lucrative dermatology generics market" and will also result in cost synergies. The firm is "positive on the future prospects of Sandoz, as it enjoys a 50 percent share of the biosimilar market which is expected to grow significantly and reach $15 billion – $20 billion in 2020."
The transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the second half of this year.