(Updates with Medicis CEO’s comment in third paragraph.)
Nov. 18 (Bloomberg) -- Medicis Pharmaceutical Corp. won a bankruptcy auction for Graceway Pharmaceuticals LLC, a maker of skin treatments and asthma medication, with a $455 million bid.
Medicis, based in Scottsdale, Arizona, still must obtain approval from Graceway’s board and the bankruptcy court in Wilmington, Delaware, to complete the acquisition. Graceway will ask U.S. Bankruptcy Judge Peter J. Walsh to approve the sale at a hearing scheduled for Nov. 22.
“We are pleased to announce this strategic acquisition of the Graceway product portfolio, and the ability to broaden our presence within dermatology,” Jonah Shacknai, chief executive officer of Medicis, said today in a statement.
Graceway, based in Bristol, Tennessee, filed for bankruptcy on Sept. 29 after the loss of patent protection on its top- selling product, the skin cream Aldara, led to a decline in sale. The company listed debt of as much as $1 billion and assets of as much as $500 million.
Medicis, which makes wrinkle treatments and acne drugs, will expand its portfolio with Graceway’s dermatology, respiratory and women’s health treatments. Medicis beat Cham, Switzerland-based Galderma SA, which started the auction as the lead bidder with an offer of $275 million.
Graceway bought 3M Co.’s pharmaceutical business in the Americas, including Aldara, for $875 million in 2007.
Aldara, a cream used to treat precancerous skin growths and genital warts, generated about 85 percent of Graceway’s sales in 2009, a share that plummeted to about 16 percent in the first two quarters of 2011, according to court papers.
To make up for the lost sales, Graceway developed Zyclara, which is used to remedy the same skin conditions as Aldara.
The drugmaker can exclusively market Zyclara for treating certain skin diseases related to sun overexposure until 2013 and for genital warts until 2014, according to court papers.
Zyclara accounted for more than a third of Graceway’s sales in the first two quarters of 2011. The Maxair Autohaler, a rescue inhaler used to treat asthma, generated about 16 percent of sales in the period.
“We are very pleased to be adding to our pipeline several mid- and late-stage products with a combined annual net sales peak potential of over $500 million in the dermatology and women’s health categories,” Shacknai said in the statement.
Medicis fell 29 cents, or 0.9 percent, to $32.38 at 1:35 p.m. in New York Stock Exchange composite trading.
Graceway owes first-lien lenders about $430.7 million, according to court papers. The drugmaker owes about $330 million to second-lien lenders and about $81.4 million to unsecured mezzanine lenders represented by Goldman Sachs Credit Partners LP as agent.
Trade and general unsecured creditors are owed about $30 million.
The case is In re Graceway Pharmaceuticals LLC, 11-13036, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--With assistance from Catherine Larkin in Indianapolis. Editors: Stephen Farr, Andrew Dunn
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