Interview – Reality sets in for Almirall

If a little over two years ago you had asked Almirall where its future lay it would have pointed unequivocally to its respiratory portfolio and the novel irritable bowel syndrome drug linaclotide. But two years is a long time in drug development, and the group has now cut both loose.

Its senior director of corporate development, Jordi Sabé, makes no bones about the reason: at the end of the day neither asset was doing very well in Almirall’s hands. Instead the Spanish company has turned its sights, along with a €1.5bn ($1.6bn) war chest, to dermatology, a field with its own opportunities and risks.

A decisive blow has already been struck with Almirall’s purchase of Aqua Pharmaceuticals, a move that gave it a direct US presence in dermatology, selling close to €140m a year. “When you want to be a therapy area leader you can’t only focus on Europe,” Mr Sabé tells EP Vantage. “We want to have major exposure to the US.”

He quickly points out that this business already makes Almirall the fourth-biggest prescription dermatology player in the US, while the purchases of Hernal and a Shire portfolio including Solaraze put it in first place in Germany and fifth in Europe.

This is where the $875m divestment of the respiratory portfolio to AstraZeneca, and the recent €64m sale of linaclotide rights to Allergan, come into play: “We would like to deploy all the proceeds that we received on the AstraZeneca and Constella (linaclotide) deals on both R&D and business development.”

Firepower

With almost €800m in cash and €317m of gross debt how big a business could Almirall buy? Mr Sabé reckons €1-1.5bn would not be out of the question, “depending on the quality of earnings of the assets that we buy”, and he is happy to take on more debt, though wants to avoid very aggressive leveraging.

This might be an impressive way to put your money where your mouth is, but Almirall’s U-turn on the respiratory and GI products might still strike some as surprising. Mr Sabé says Almirall needed to act decisively given that both businesses could reach full potential only in the hands of a stronger player.

Almirall had licensed linaclotide from Ironwood six years ago for $95m in up-front and near-term milestone fees, but ultimately “we came to the conclusion that Constella was not for us. It was growing, but not as fast as we had expected.”

With the respiratory drugs it was a case of being outgunned by the big primary care players GlaxoSmithKline and Novartis – not without their own problems, of course – and Astra offering a sum of money that Almirall just could not turn down.

“We could never maximise the respiratory business,” says Mr Sabé. “If you don’t have a leading position sometimes it’s better to recognise that ... and focus on one therapy area where you can actually make a difference.”

If that area is dermatology, perhaps Almirall was in the running to buy the Astellas portfolio that fell to Leo Pharma last week (Leo gets more skin in the dermatology game, November 12, 2015). Mr Sabé will only confirm that “We were aware of this particular project.”

Valuation inflation

It might have been a case of valuation mismatch, though having two European speciality groups seeking aggressively to bulk up in dermatology is bound to push up prices. Mr Sabé also points to the US liquidity boom, driven by low interest rates, but is confident of a correction where acquirers' financing means are exhausted and prices become more reasonable.

In the third quarter dermatology grew 21.6% to account for 42.5% of Almirall’s revenue, so the company clearly will not want to neglect the rest of its portfolio. But the growth focus is on buying in more skin assets, especially in aesthetics and OTC products where strong brands can complement Almirall’s prescription business.

This will ring bells with those who remember companies pursuing this very strategy to send a “for sale” signal to Valeant, which until recently was hoovering up dermatology companies. True, Valeant now has its own issues to worry about, but perhaps the Gallardo family, which owns 66% of Almirall, has something up its sleeve.

Mr Sabé is doubtful: “The family is fully committed to the future of this company in dermatology, and I don’t see why (it) should take a different view.”

This story has been corrected to note Almirall's ranking in the US prescription dermatology market.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobPlieth on Twitter

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