Viatris To Acquire Two Ophthalmology Companies for Up To $750 M; Updates Divestments

Viatris has agreed to acquire two ophthalmology drug companies for a combined total of between $700 million and $750 million: Oyster Point Pharma, a Princeton, New Jersey-based bio/pharmaceutical company, and Famy Life Sciences, an Ahmedabad, Gujarat, India-based bio/pharmaceutical company. The acquisitions would establish a new ophthalmology franchise for Viatris. The company also provided an update of its previously announced strategic priorities, which includes a target of achieving approximately $5 billion to $6 billion in pre-tax proceeds from select investments.

Acquisitions of Oyster Point Pharma and Famy Life Sciences
Viatris says it anticipates that the acquisitions of Oyster Point Pharma and Famy Life Sciences will have the potential to add at least $1 billion in net sales and at least $500 million in adjusted earnings before interest, tax, and amortization (EBITDA) by 2028.

Oyster Point has one commercial product, Tyrvaya (varenicline solution), a nasal spray for dry- eye disease, which was approved by the US Food and Drug Administration in 2021.  It also evaluating other indications for varenicline solution nasal spray, including neurotrophic keratopathy (a rare disease affecting the cornea), dry-eye associated with contact lens intolerance, and ocular surface preparation for refractive surgeries. Phase II results for varenicline for treating neurotrophic keratopathy are expected in the fourth quarter of 2022. In addition, the company has a pipeline of investigational  gene therapies platform is in development for treating select ocular surface diseases.

Famy Life Sciences has six late-stage clinical assets in large disease areas such as dry eye, blepharitis (inflammation of the eyelids), and presbyopia (age-related farsightedness). In an unrelated move in 2015, Viatris (then Mylan Pharmaceuticals) acquired the women’s healthcare franchise of Famy Care (an associated company of Famy Life Sciences) for $800 million. Viatris has since decided to divest its women’s healthcare franchise (see further information in this story here).

Under the agreement, Viatris will acquire Oyster Point for $11 per share in cash upfront through a tender offer. In addition, each Oyster Point stockholder will receive one non-tradeable contingent value right, representing up to an additional $2 per share contingent upon Oyster Point’s achieving certain metrics based on full-year 2022 performance. The acquisition of Oyster Point is expected to close in the first quarter of 2023, subject to customary closing conditions, including receipt of regulatory approval, and tender acceptance of more than 50% of Oyster Point shares.

Viatris provides updates on key strategic priorities
The pending acquisitions Oyster Point Pharma and Famy Life Sciences are part of a larger strategic plan by Viatris to add new revenue potential as it implements a previously announced two-phased roadmap that detailed the company’s key strategic priorities and financial targets.

Robert J. Coury, Executive Chairman of Viatris, provided an update this week (November 7, 2022) on that plan. Key goals of Phase 1 of that roadmap, consisting of the years 2021 through 2023, were to: integrate the “new Viatris,” which was formed from the 2020 merger of Mylan and Upjohn, Pfizer’s generics and established medicines business;  generate $1 billion in cost synergies; de-leverage the company’s balance sheet; pay down at least $6.5 billion in debt, reduce its gross leverage to a long-term target ratio of 3x, and maintain its investment-grade credit rating while returning capital to shareholders.

He said that the company is on track with its integration plans and its goal to achieve least $1 billion of cost synergies by the end of Phase 1 (i.e., 2023), In terms of debt-reduction, the company has paid down $4.2 billion in debt since the beginning of 2021 and is on track to paying down at least $6.5 billion by the end of Phase 1 (i.e., 2023).

The company is also proceeding with the sale of its biosimilar business to Biocon Biologics, a Bangalore, India-based bio/pharmaceutical company, for $3.35 billion, which includes an equity stake in Biocon Biologics and says it expects the deal to close shortly (as reported  on November 7, 2022). The move is part of an overall plan by Viatris to achieve $9 billion in pre-tax proceeds through the Biocon Biologics transaction and the divestment of other non-core assets.

Also, the company detailed this week those other non-core assets that it plans to divest by the end of 2023, with a target of achieving between $5 billion and $6 billion in pre-tax proceeds. The four assets being planned to be divested are: (1) the company’s over-the-counter business; (2) its women’s healthcare business; (3) its active pharmaceutical Ingredients (API) business while retaining some selective development API capabilities; and (4) certain geographic markets that were part of the combination with Pfizer’s Upjohn business that are smaller in nature and in which Viatris had no established infrastructure prior to or following the merger with Pfizer’s Upjohn.

Overall, with its Phase 1 (implemented between 2021 and 2023) and Phase 2 (implementing in 2024 and beyond) the company says that its base business is targeted to achieve  1% organic top-line growth long-term. It says that its product pipeline is expected to offset annual base business erosion, which it now expects to be 2-3% beginning in Phase 2 (implementing in 2024 and beyond versus previous forecasts of 4-5% that the company modeled for Phase 1 of its strategic plan

Source: Viatris (update on strategic plan),  Viatris (acquisitions) and Oyster Point Pharma