Valeant acquires Eyetech

Key Points

Mississauga, Ontario-Six years after OSI Pharmaceuticals Inc. bought Eyetech Pharmaceuticals Inc. for $650 million on the promise of its treatment for wet age-related macular degeneration (AMD), Valeant Pharmaceuticals International Inc. has announced it will acquire Eyetech for $22 million.

The stark difference in price illustrates how rapidly technology is developing to target specific disease areas.

When it was approved by the FDA in December 2004, Eyetech's pegaptanib sodium injection (Macugen) was hailed as a revolutionary, breakthrough treatment for wet AMD, which robbed patients of their sight and had no other FDA-approved treatment. It was the first in what was then a new class of anti-vascular endothelial growth factor (VEGF) drugs and was said to represent a new era in treatment of wet AMD. It also was the first therapeutic drug delivered by intraocular injection.

Moreover, clinical evidence has shown ranibizumab and bevacizumab not only halted vision loss but improved it in many patients.

By late 2006, pegaptanib annual sales had fallen to $50 million, and OSI announced it would sell Eyetech. Within 2 years, sales dropped to $12 million, and in August 2008, former (OSI) Eyetech employees purchased the division from OSI and established Eyetech Inc.

Laurie Little, vice president of investor relations, Valeant Pharmaceuticals, said the acquisition helps Valeant expand its presence within ophthalmology, building on two products it collected in 2010 with its purchase of Aton Pharma.

That deal gave Valeant its first ophthalmic products: preservative-free ophthalmic timolol (Timoptic) in Ocudose, for the treatment of glaucoma, and hydroxypropyl cellulose ophthalmic insert (Lacrisert), a dry-eye treatment. Aton had acquired the U.S. marketing rights for the Timoptic product line from Merck in February 2009.

"Having two [ophthalmology] products on the list is really too small, so [we hope] this new Eyetech acquisition will help beef up that infrastructure," Little said.

Eyetech President Steven B. Bettis said he would stay on board with the company under Valeant to assist with the transition.

"There should be no disruption in the level of service to our customers regarding [pegaptanib]," he said. "We look forward to a positive and productive future with Valeant Pharmaceuticals and contributing to the ophthalmology platform."

Little said Valeant finds the ophthalmology space "attractive and interesting," and its 2008 acquisition of Dow Pharmaceutical Sciences gave Valeant some research and development capabilities in dermatology and ophthalmology.

She said the company had not decided what aspect of ophthalmology it would target. On Jan. 30, Valeant walked away from an offer it had made to purchase ISTA Pharmaceuticals for $360 million. ISTA's President and Chief Executive Officer Vicente Anido Jr., PhD, said in January the company would solicit bids from other companies and was not able to meet Valeant's deadline for a decision on the offer.

"We were really hoping to use that franchise as a growth platform," Little said.

However, ISTA was one of about 20 companies worldwide Valeant was "in discussions with" about possible acquisition, and Valeant was not willing to wait longer for ISTA, she said. Valeant acquired 11 companies in 2011.

"For us, it's really important to move quickly. We felt we put a pretty compelling offer out there, and we really wanted a conversation," Little said of the ISTA offer. "We prefer friendly acquisitions like the one we did with Eyetech, but sometimes we feel the shareholders should have a chance to weigh in."

She said it was a business decision, and wished ISTA's board well.

"They're doing what they think is right," Little said. "And we hope, at the end of the day, someone else will come along and be willing to pay more than we were." Investment analysts are giving Valeant's acquisition of Eyetech mixed reviews.

Louise Chen, of Collins Stewart, said in a Feb. 13 report that the acquisition was a small deal-with an additional $4 million possible in potential milestones-at only a two-times sales multiple, compared with what she saidwas an industry average of three-times sales. She advised investors to watch for Valeant to profit from the deal, even though Eyetech only had net revenues of about $15 million. She noted in a Jan. 6 report that Valeant hopes to be a Top 15 global pharma company by the end of 2013.

"We continue to expect stock price appreciation to be driven by upward earnings revisions and multiple expansion. These upsides could come from strong execution, acquisitions, revenue synergies, and operating leverage," Chen wrote.

David A. Amsellem, of Piper Jaffray, said the deal was inconsequential for Valeant.

"They are trying to carve out a bigger presence in the eye-care space. [Pegaptanib], though, is not a widely used product and faces a lot of competition, so [I'm] not sure how that deal advances that goal," he told Ophthalmology Times. "Maybe they are just trying to send a signal to physicians that they are intent on becoming a more serious player in ophthalmology."