Wednesday, May 2, 2012

Novartis acquires Fougera Pharmaceuticals for $1.5 billion.


At 3.6 x Revenue multiple and 8.8x EBITDA, fougera acquisition seems to be a good catch for Novartis. The dermatology market is growing in double digit and this together with the expected cost and revenue synergies, we see the deal as very sensible. Assuming cost synergies as 15%  of the total cost base, and a cost of financing as 2%, the deal is likely to be EPS accretive from the 2nd year.  Combined sales of the newly merged company of $620m, mostly in the US, will put it among the leading dermatological companies worldwide.
Fourgera is a specialist dermatology company based in Long Island, US. The business comprises two divisions:1) PharmaDerm, a specialty dermatology unit that formulates, develops and markets its own dermatological pharmaceuticals; 2) Fougera – the generic drugs division focused on multi-source Rx and OTC
dermatologicals. .
Fougera is the number 1 manufacturer of topical pharmaceutical products in the US. Seasoned European Pharma investors may recall that this was once part of Atlanta (later acquired by Nycomed) who significantly invested in this business during the early part of the last decade. When Nycomed was acquired by Takeda in 2011, Fougera was spin out to the previous private equity holders of Nycomed and put under new management, with CEO, CFO and COO coming from King Pharmaceuticals, that has been acquired by Pfizer in 2010.