Germany's Merz Pharma withdraws bid for Obagi Medical Products

Germany's Merz Pharma Group today said that it is backing off from a bidding war with Canadian specialty pharmaceutical company Valeant Pharmaceuticals International Inc for US cosmetic products maker Obagi Medical Products Inc.

Ontario-based Valeant, the largest publicly traded drug maker in Canada, had on 20 March offered to buy Obagi for $19.75 a share or $344 million, in order to boost its dermatology and plastic-surgery business. (See: Valeant Pharmaceuticals to acquire Obagi Medical Products for $344 mn)

Frankfurt-based Merz Pharma, which makes prescription and over-the-counter treatments for neurological and metabolic disorders, entered the race on 2 April by offering $22 per share or $383.5 million.

Valeant, one of the most aggressive acquirers in the pharmaceutical industry, immediately raised its offer to $24 per share.

"Merz is a disciplined buyer and at this level the economics of such a transaction do not meet our requirements," Merz CEO, Philip Burchard said in a statement.

Merz makes innovative drugs and medical products for neurological and clinical dermatology indications as well as for aesthetics medicine and metabolic disorders.

Its drug Memantine, the world's first glutamatergic drug for the treatment of moderate to acute Alzheimer's-induced dementia, is the second-most prescribed medication for dementia.

The Merz Group employs 2,391 people and generated revenue of €913 million in 2012.

Founded in 1988, California–based Obagi is a specialty pharmaceutical company that develops proprietary topical aesthetic and therapeutic prescription-strength skin care systems.

Using its 'penetrating therapeutics; technologies, Obagi's products are designed to improve penetration of agents across the skin barrier for common and visible skin conditions in adult skin, including premature aging, photodamage, hyperpigmentation, acne, sun damage, rosacea, and soft tissue deficits, such as fine lines and wrinkles.

Obagi had 2012 revenues of about $120 million.

Valeant has recently been acquiring several small dermatology and aesthetics companies in the US, including Medicis Pharmaceuticals Corp, which it acquired in September 2012 for $2.6 billion. (See: Canada's Valeant to acquire Medicis Pharmaceutical for $2.6 bn)

With a market cap of $22.4 billion and annual revenues of $3.5 billion, Valeant has a product portfolio of about 490 products, and has two drugs in the top 200 drugs by sales in the US. Its main markets are in the US, Canada, Mexico, Brazil, Europe and Australia.

Valeant has made over 60 acquisitions since 2008, including some recent ones like Sanofi's skincare unit Dermik, Ortho Dermatologics, a unit of Johnson & Johnson, Lithuania-based specialty pharmaceuticals company AB Sanitas, Russian peer Natur Produkt International, some assets of Austrian pharmaceutical company Gerot Lannach Eyetech, a stake in Brazil's Probiotica Laboratorios, certain branded generic assets from Mexican pharmaceutical company Atlantis Pharma and US-based Pedinol Pharmacal, and OraPharma.