Valeant Pharma's $345M buyout signals opportunity for biotechs
Valeant Pharmaceuticals' ($VRX) planned $345 million acquisition of Johnson & Johnson's ($JNJ) Ortho Dermatologics could be another positive sign for biotech companies, as Big Pharma outfits shed their auxiliary businesses to enhance focus on novel drugs.
Janssen Pharmaceuticals, a J&J unit, and French drug giant Sanofi ($SNY) have both opted to sell dermatology product businesses to specialty Canadian pharma Valeant this week. And at least in Sanofi's case, the Big Pharma wants to pump the proceeds of its $425 million sale of its Dermik skincare group into its core pharmaceutical business. For biotech firms, that could be good news as Sanofi, J&J and other huge drugmakers form partnerships with outside developers with novel science.
As we've noted before, J&J is one of the perennial standouts on the biotech deal front. The company is realizing the payoff of its investments in deals such as its partnership with Vertex Pharmaceuticals ($VRTX), which gave the company European rights to newly approved hepatitis C drug telaprevir (Incivek), and its $1 billion buyout of Cougar Biotechnology, which brought J&J its recently approved prostate cancer drug abiraterone (Zytiga). And further external deals are in the offing, J&J executives have said.
In the meantime, small developers could also benefit from opportunities to gain rights to drug programs that Big Pharma outfits decide to discontinue internally. One of the great historic examples of this would be how Cubist Pharmaceuticals ($CBST) grabbed rights on the cheap to the antibiotic Cubicin from Ely Lilly ($LLY) back in the 1990s and developed the asset into the top-selling product it is today.