Organon to Acquire Dermavant

Organon and Dermavant Sciences Ltd. recently announced they have entered into a definitive agreement, under which Organon will acquire Dermavant, a Roivant company dedicated to developing and commercializing innovative therapeutics in immuno-dermatology.

Dermavant’s novel product, VTAMA (tapinarof) cream, 1%, for the topical treatment of mild, moderate, and severe plaque psoriasis in adults, was approved by the US FDA 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 (sNDA) for VTAMA cream as a potential treatment for atopic dermatitis (AD) in adults and children two years of age and older, with Prescription Drug User Fee Act (“PDUFA”) action expected in the fourth quarter of calendar year 2024.

Psoriasis is a common chronic inflammatory skin disease affecting over 8 million Americans 20 years of age or older and 125 million people worldwide. Atopic dermatitis is one of the most common inflammatory skin conditions impacting approximately 16.5 million adults and more than 9.6 million children in the US. In adults, women are impacted disproportionately. Psoriasis presents a significant impact to quality of life and atopic dermatitis is associated with a higher disease burden for women compared to men.

“We look forward to combining Dermavant’s strong dermatology commercial and field medical organization in the US, with Organon’s market access capabilities, regulatory expertise and worldwide commercial reach. This will allow us to bring VTAMA cream, a patient-focused innovation in dermatology, providing an effective, well-tolerated, non-steroidal treatment option to the millions of people living with plaque psoriasis and potentially atopic dermatitis,” said Kevin Ali, Organon Chief Executive Officer. “The acquisition will deliver on Organon’s objective of improving the health of women throughout their life stages by investing in treatments for conditions that affect women differently.”

“This is another example of Roivant’s ability to offer creative win-win collaborations. We are able to meet Organon’s structural objectives and to create a transaction that is very attractive to both Roivant and Dermavant stakeholders, while still preserving meaningful economics tied to the potential future success of VTAMA,” added Matt Gline, Chief Executive Officer of Roivant. “Additionally, we are excited for VTAMA cream to benefit from Organon’s commercial scale. We believe they have the capabilities and reach to ensure patients globally can access this important medicine.”

“This is an unparalleled opportunity for continued growth and innovation for Dermavant, preserving our values and vision and allowing them to thrive in the new structure at Organon. We set out to revolutionize the standard of care in dermatology, and we delivered—becoming the #1 branded topical for plaque psoriasis within just two months after launching VTAMA cream, and providing over 275,000 patients with the relief they desperately needed,” said Todd Zavodnick, Chief Executive Officer of Dermavant. “I am certain that this merger will provide us the scope and global scale to unleash the potential of VTAMA cream.”

“We structured the deal economics to be heavily weighted towards success-based milestones and royalties, similar to other transactions we have executed to date. This is consistent with our commitment to disciplined capital allocation as we look to continue to reduce our leverage, but also strategically add growth assets,” said Matthew Walsh, Organon Chief Financial Officer.

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 6, 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.

Roivant was represented by Freshfields Bruckhaus Deringer LLP as legal advisor and Goldman Sachs & Co. LLC as financial advisor. Organon was represented by Covington & Burling LLP as legal advisor.

VTAMA cream is a non-steroidal once-daily topical treatment that works by activating aryl hydrocarbon receptors in the skin to reduce inflammation and normalize the skin barrier. The safety and effectiveness of VTAMA cream was evaluated via randomized, double-blind, vehicle-controlled trials, PSOARING-1 and 2 for psoriasis. The safety and efficacy of VTAMA for the treatment of atopic dermatitis was also evaluated as part of the ADORING-1 and 2 Phase III clinical studies, and is currently under review with the FDA.

Organon is an independent global healthcare company with a strategy to help improve the health of women throughout their lives. Organon’s diverse portfolio offers more than 60 medicines and products in women’s health, biosimilars, and a large franchise of established medicines across a range of therapeutic areas. In addition to Organon’s current products, the company invests in innovative solutions and research to drive future growth opportunities in women’s health and biosimilars. In addition, Organon is pursuing opportunities to collaborate with biopharmaceutical partners and innovators looking to commercialize their products by leveraging its scale and agile presence in fast growing international markets. Organon has a global footprint with significant scale and geographic reach, world-class commercial capabilities, and approximately 10,000 employees with headquarters located in Jersey City, NJ. For more information, visit http://www.organon.com.