Sandoz to acquire Fougera Pharmaceuticals

Novartis has signed a definitive agreement to acquire specialty dermatology generics company Fougera Pharmaceuticals. Under the terms of the agreement, Novartis will acquire the business, which is based in Melville, New York, for USD 1.525 billion in an all-cash transaction.

The sellers are comprised of a consortium of private equity funds led by Nordic Capital, DLJ Merchant Banking (a Credit Suisse affiliate) and Avista Capital Partners.

The acquisition creates another strong global growth platform for Sandoz, the generic pharmaceuticals division of Novartis. Based on 2011 IMS data, the combined businesses will become the #1 global company in generic dermatology medicines, with estimated annual global sales of nearly USD 620 million, primarily in the US.[1] Fougera has strong dermatology development and manufacturing expertise, with numerous launches planned for 2012 and beyond.

“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. 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,” said Jeff George, Global Head of Sandoz.

“Fougera and Sandoz serve many of the same customers in the US, creating significant sales and cost synergies with Sandoz’s sizeable US generics business,” said Don DeGolyer, President of Sandoz US. “We welcome the team from Fougera Pharmaceuticals into Sandoz and Novartis.”

Sandoz will leverage its leading position both in the US generics sector and its presence in over 130 countries worldwide to expand Fougera’s existing sales base and bring its broad dermatology portfolio to new markets around the world.

Fougera is a specialty dermatology business with 2011 net sales of USD 429 million, and employs approximately 700 people across its two primary sites, located in New York. Fougera Pharmaceuticals operates two main businesses: Fougera, a leading player in the USD 2.1 billion US dermatology generics sector[2] with 45 products and more than 200 SKUs and PharmaDerm, a branded specialty pharma business with 17 brands and over 40 SKUs.

The transaction requires regulatory approvals and is expected to be completed in the second half of 2012. Based on Fougera Pharmaceuticals’ 2011 earnings before interest, taxes, depreciation, and amortization (EBITDA) of USD 173 million, the acquisition represents a multiple of 8.8 times. The transaction is expected to be accretive to core earnings per share (EPS) and will be financed from the Group’s existing cash resources and cash flow. The transaction meets Novartis’ strict financial criteria for acquisitions relative to targeted cash flow return on investment (CFROI) metrics.

References

1. IMS MIDAS at gross ex-manufacturer prices
2. IMS MIDAS at gross ex-manufacturer prices, excluding OTC