Organon to acquire Dermavant for consideration up to $1.2B

Organon (OGN) and Dermavant Sciences announced that they have entered into a definitive agreement, under which Organon will acquire Dermavant, a Roivant (ROIV) company dedicated to developing and commercializing innovative therapeutics in immuno-dermatology. Dermavant’s novel product, VTAMA cream, 1%, for the topical treatment of mild, moderate, and severe plaque psoriasis in adults, was approved by the U.S. Food and Drug Administration in May 2022. VTAMA cream is a once-daily, steroid-free, topical applied to affected areas with no safety label warnings or precautions and without restrictions on location and duration of use or body surface area. The FDA is reviewing a Supplemental New Drug Application for VTAMA cream as a potential treatment for atopic dermatitis in adults and children two years of age and older, with Prescription Drug User Fee Act action expected in the fourth quarter of calendar year 2024. Organon has agreed to acquire Dermavant for aggregate consideration of up to approximately $1.2 billion, with an upfront payment of $175 million and a $75 million milestone payment upon regulatory approval in AD, as well as payments of up to $950 million for the achievements of certain commercial milestones. In addition, Organon will pay Dermavant shareholders tiered royalties on net sales. Dermavant owns the rights to VTAMA cream globally excluding China and has out licensed Japan rights. Completion of the transaction is subject to review under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Closing of the transaction is currently expected to take place in the fourth quarter of 2024. Upon closing of the transaction, as part of the purchase price consideration, Organon would assume Dermavant liabilities with an approximate value of $286 million reported by Roivant as of June 30, 2024, which would be subject to fair value accounting by Organon. Given the transaction is expected to close in the fourth quarter 2024, revenue contribution from VTAMA as well as expenses associated with onboarding the product are not expected to impact the full year 2024 non-GAAP guidance ranges provided on August 6th, 2024. The transaction is expected to be modestly dilutive to Adjusted EBITDA in 2025, turning accretive in 2026. Organon expects net leverage to be elevated above 4.0x as a result of the transaction. The transaction is not expected to result in a revision to Organon’s capital allocation priorities.