LEO Pharma re-acquires product licensing rights from Warner Chilcott

Sep 24 2009

Warner Chilcott plc (Nasdaq: WCRX) and LEO Pharma announced today that, in exchange for a one-time cash payment of $1.0 billion to Warner Chilcott, LEO Pharma is re-acquiring Warner Chilcott's exclusive product licensing rights in the United States to its topical psoriasis treatments Taclonex(R), Taclonex Scalp(R), Dovonex(R) as well as rights to all products in LEO's development pipeline, and acquiring all inventories of the products.

"Since 2003, Warner Chilcott has enjoyed a strong partnership with LEO Pharma," said Roger Boissonneault, President and Chief Executive Officer of Warner Chilcott plc. "This transaction allows Warner Chilcott to concentrate on new strategic initiatives, including the acquisition and integration of the Proctor & Gamble Pharmaceuticals business, and enables LEO Pharma to expand beyond research and development and into the commercialization of products in the United States."

"The acquisition of the psoriasis dermatology portfolio from Warner Chilcott provides LEO with a unique stepping stone and we have incorporated an affiliate to be headquartered in New Jersey. The deal is LEO Pharma's largest ever and is indicative of our commitment to geographic expansion and growth in areas including the USA. We have valued the collaboration with Warner Chilcott and look forward to establishing LEO as a leading company within the American Dermatology market, armed with one of the strongest pipelines within dermatology. We expect to start operations in the beginning of 2010," said Gitte Aabo, Chief Executive Officer of LEO Pharma.

Under the terms of the agreement, Warner Chilcott has agreed to continue distribution and promotion of Taclonex(R), Taclonex Scalp(R) and Dovonex(R) for LEO Pharma until December 31, 2009 and to perform certain transition services for LEO Pharma for up to one year.

The repurchase of the product rights and inventories for $1.0 billion, which is expected to close today, will result in a one-time gain for Warner Chilcott of approximately $450 million after-tax, or approximately $1.79 per share based on 251.3 million shares outstanding. Net cash proceeds, after taxes triggered by the gain, are expected to be approximately $980 million. Warner Chilcott is using a portion of the cash generated by the sale to repay and terminate its existing senior secured credit facilities ($480 million of which was outstanding on September 23, 2009). In addition, the proceeds will reduce the amount of financing necessary in connection with Warner Chilcott's pending acquisition of Procter & Gamble Pharmaceuticals.

Morgan Stanley acted as financial adviser to LEO Pharma on this transaction, and its legal advisor is Morgan, Lewis & Bockius LLP. Warner Chilcott's legal advisor is Davis Polk & Wardwell, LLP.