10:42 AM EDT, 09/18/2024 (MT Newswires) -- Organon (OGN) on Wednesday agreed to acquire Roivant Sciences' ( ROIV ) immuno-dermatology subsidiary, Dermavant, in a deal worth up to $1.2 billion.

The healthcare company will pay $175 million upfront and up to $950 million for the achievement of certain commercial milestones. It will also pay $75 million upon the US Food and Drug Administration's approval of Dermavant's flagship product, Vtama, for the treatment of atopic dermatitis.

In May 2022, the FDA approved Vtama as a topical treatment of plaque psoriasis in adults. The regulator is currently reviewing a supplemental new drug application for the dermatological cream as a potential treatment for atopic dermatitis in individuals aged two years and older, with the companies expecting a decision in the fourth quarter.

"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," Organon Chief Executive Kevin Ali said in a statement.

The deal, which requires antitrust clearance, is expected to close in the fourth quarter. Organon said it will pay tiered royalties to Dermavant's shareholders on sales of Vtama and assume the company's liabilities, valued at roughly $286 million as of June 30, upon completion of the transaction.

"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," Roivant CEO Matt Gline said in a statement.

Organon estimates the acquisition to be "modestly dilutive" to adjusted earnings before interest, taxes, depreciation and amortization in 2025 and turn accretive the following year. The company doesn't anticipate revenue contribution from Vtama and the product's onboarding expenses to impact its full-year outlook on an adjusted basis issued in August.

"We structured the deal economics to be heavily weighted towards success-based milestones and royalties," Organon Chief Financial Officer Matthew Walsh said. "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."

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