Organon to acquire Dermavant for $1.2bn, expanding its presence in immuno-dermatology

Organon, a global healthcare company focused on women’s health, has announced a definitive agreement to acquire Dermavant Sciences Ltd., a Roivant company specialising in immuno-dermatology, in a deal valued at up to $1.2 billion. This acquisition marks a significant step in Organon’s strategy to expand its portfolio, particularly in dermatology, where Dermavant has made strides with its flagship product, VTAMA (tapinarof) cream, a topical treatment for plaque psoriasis.

Acquisition details and potential impact

The agreement includes an upfront payment of $175 million and a $75 million milestone payment contingent on the U.S. Food and Drug Administration (FDA) approval of VTAMA cream for treating atopic dermatitis. Additionally, Organon will provide up to $950 million for commercial milestones and tiered royalties based on VTAMA sales. The transaction, subject to regulatory approvals, is expected to close by the fourth quarter of 2024. Organon will also assume Dermavant liabilities of around $286 million as part of the purchase price.

Expanding VTAMA’s reach

VTAMA cream, approved by the FDA in May 2022 for plaque psoriasis, has shown strong market performance, quickly becoming the top branded topical treatment for the condition. With FDA review underway for its use in treating atopic dermatitis, a more prevalent inflammatory skin condition, VTAMA has the potential for further growth. If approved, it would offer an effective, steroid-free topical treatment for both conditions, with no location or duration restrictions.

Organon’s Chief Executive Officer, Kevin Ali, highlighted that the acquisition would allow Organon to leverage its market access capabilities and global commercial reach to maximise the impact of VTAMA. He said it would help fulfil the company’s mission to improve women’s health, as these dermatological conditions disproportionately affect women.

Roivant’s Chief Executive Officer, Matt Gline, expressed confidence in Organon’s ability to scale VTAMA globally, while Dermavant’s CEO, Todd Zavodnick, remarked that this deal would enable Dermavant’s innovation to thrive under the new structure at Organon.

Financial outlook

The acquisition is expected to be modestly dilutive to Organon’s Adjusted EBITDA in 2025, becoming accretive in 2026. Organon’s Chief Financial Officer, Matthew Walsh, noted that the transaction is consistent with the company’s disciplined approach to capital allocation and strategic asset growth. The deal also aligns with Organon’s efforts to reduce leverage, although net leverage is anticipated to rise above 4.0x due to the transaction.

This acquisition underscores Organon’s commitment to expanding its portfolio in treatments that impact women disproportionately while reinforcing its global presence in the dermatology market.