Mylan Beefs Up Topical Derm Business With Renaissance Buy

After a failed bid for Perrigo, Mylan continues to add to its portfolio with smaller deals that has it competing more closely with the former acquisition target.

Mylan NV is bolstering its generic dermatology business with a small deal that adds to the value of its previously-announced acquisition of Sweden's Meda AB, allowing the generics company to make up for its lost Perrigo Co. PLC opportunity.

The generics giant announced May 13 that it would be picking up the topical dermatology business from Renaissance Acquisition Holdings, a private holding of RoundTable Healthcare Partners, for $950m in cash plus another $50m in contingent payments. The deal is expected to close in the third quarter.

The deal gives Mylan a much larger presence in generic topical dermatology products – former acquisition target Perrigo has 50% of its generics portfolio in this space. The new portfolio includes more than two dozen topical products, as well as another 25 compounds in the pipeline. The deal also brings Mylan added infrastructure in the US and dermatology space along with a contract development and manufacturing organization. Mylan touted the 1,200 employees it would be integrating as well.

RoundTable will retain the sterile-focused part of the business and the manufacturing facilities associated with it.

While this acquisition will bolster a space that Mylan has shown interest in for some time, the cost of the acquisition is a drop in the bucket. Mylan is amongst the many overly-acquisitive companies that has often been criticized for racking up high debt levels as it pursues growth through M&A instead of organically. Yet, this acquisition will not add to the company's debt levels. Mylan has said that it will use cash on hand, as well as already established credit facilities, retaining its current debt-to-EBITDA ratio of 3.8 times.

The Renaissance portfolio had about $350m in sales in 2015, according to Mylan. Evercore ISI analyst Umer Raffat expects the deal will contribute about 19 cents per share to Mylan's 2016 earnings.

That wasn't the case with Mylan's last deal in the space – its $9.9bn grab of Meda in February, which was paid for with a combination of cash, debt and stock (Also see "Mylan Finally Nabs Meda In Diversification Play" - Scrip, 11 Feb, 2016.). Analysts and investors had been hoping that Mylan would do a "transformative" deal after its seven-month pursuit of Perrigo failed in 2015, but Mylan CEO Heather Bresch was highly criticized for the high price tag of the deal and its timing in a rocky market (Also see "Down Market Prompts Scrutiny Over M&A" - Scrip, 12 Feb, 2016.).

Meda contributes about 900 branded, over-the-counter and generic products to the combined company, as well as 500 employees. The company is expected to be completely integrated into Mylan by 2018. The Swedish company had sales of about $2.3bn in 2015 and is expected to continue on a growth trajectory, said Mylan.

Both Meda and the Renaissance portfolio add to Mylan's business in a way that the company has been pursuing for a long time. While Mylan would've gotten much more had its $26bn acquisition of Perrigo succeeded, this is one of the key areas that Mylan was hoping to gain through that deal. Now Mylan gets it at a drastically discounted price and will have a much smaller, easier company to integrate (Also see "Winning! Mylan And Perrigo: Why Everybody Wins" - Scrip, 16 Nov, 2015.).