Allergan Inc. has one of the strongest dermatology units in the U.S. and it just made its pipeline a bit heartier with the July 19 announcement that it has agreed to acquire privately-held dermatology company Vicept Therapeutics.

Vicept has been developing V-101 for the treatment of erythema, or redness, associated with rosacea. The topical cream is currently in Phase II testing, and the company hopes to move it into Phase III next year. The cream is expected to be a daily treatment.

Founded in 2009, Vicept was able to fund early and mid-stage trials with the help of venture backers Vivo Ventures, Sofinnova Ventures, and Fidelity Biosciences. The company raised $16 million from the three investors during its Series A round. The company has raised no other money to date. Vicept President and CEO Neal Walker has plenty of experience in dermatology; aside from being a practicing dermatologist for years, Walker served as the Chief Medical Officer for dermatology company Trigenesis Therapeutics prior to it being acquired by Dr. Reddy's Laboratories in 2005.

Vivo Ventures partner Albert Cha said the dermatology space appealed to the VC because the drug development process is typically shorter and less costly than with classic pharmaceuticals.

Under the terms of the deal, the Irvine, Ca-based specialty pharma has agreed to pay $75 million upfront plus another $200 million in regulatory and development milestones. Vicept investors are also eligible to receive undisclosed payments should certain sales milestones be reached.

"The acquisition of Vicept enriches our pipeline of medical dermatology products. We have entered into this partnership with the goal of adding another medical dermatology product to our portfolio that fits within our specialty strategy and would expand our current offering to dermatologists and their patients, which today includes Tazorac Topical, Aczone and BOTOX for primary axillary hyperhidrosis," Allergan spokeswoman Caroline Van Hove said in an email.

The U.S. dermatology overall market was worth $4.6 billion in 2010, according to IMS Health. Walker said V-101 could have revenues of $500 million or more once it hits the market. Yet, Leerink Swann analyst Seamus Fernandez puts the market for V-101 at a more modest $300 to $330 million in the U.S. and Western Europe.

Currently there are no treatments for the redness associated with rosacea. Patients often turn to ineffective over-the-counter treatments or to costly laser procedures that are not covered by insurance companies. Vicept expects that V-101 will be one of the first treatments on the market for the condition erythema and that it will be covered by payers. Walker said this is due to its classification as a medical dermatology product.

The Market Is Heating Up

"The U.S. market for dermatology is continuing to grow, driven by an interest in the cosmetic side of things," said Walker. "Dermatology over the years has been a little bit neglected in terms of the investment in it and now there is a renewed focus on trying to figure out why people have these disorders."

While some Big Pharmas have pulled out of dermatology, others have renewed their focus. Sanofi SA sold its U.S. and Canadian-focused Dermik dermatology unit for $425 million to Valeant Pharmaceuticals International Inc. earlier this month (Also see "Valeant Adds To Dermatology Business By Acquiring Sanofi's Dermik For $425 Million" - Pink Sheet, 11 July, 2011.). Valeant has been building up its U.S. dermatology assets by making several purchases, including the $10 million purchase of Canadian skincare and anti-aging cream company VitalScience Corp in 2010.

Takeda Pharmaceuticals was another company not interested in entering the dermatology business. The Japanese company elected not to buy the U.S. dermatology unit of Nycomed in its $13.7 billion acquisition of the Swiss company (Also see "Takeda's $13.6 Bil. Nycomed Buy Meets Multiple Strategic, Financial Imperatives" - Pink Sheet, 23 May, 2011.). Takeda said the dermatology unit was too much diversification for the company to take on.

AstraZeneca plc, on the other hand, is taking small steps to get back into the dermatology business. In March, the British pharma signed a five-year agreement with the global dermatology giant Galderma SA giving the Swiss company exclusive access to a series of AZ pipeline compounds for potential re-purposing in dermatology. (Also see "Deals Of The Week: Eisai/Epizyme, AstraZeneca/Galderma, Evotec/Harvard" - Pink Sheet, 14 March, 2011.). In 2009, GlaxoSmithKline plc bought privately owned topical products specialist Stiefel Laboratories for $3.6 billion as a means of getting back into the dermatology game (Also see "GlaxoSmithKline Buys Back Into Dermatology With $2.9 Billion Stiefel Deal" - Pink Sheet, 20 April, 2009.).

Deals like those done by GSK and AZ have given these companies footholds in consumer and OTC health care, while also allowing them to use the category as a lead-in to penetrating emerging markets.

"The first thing that jumps out about the dermatology market is the investment activity," said Sofinnova Ventures partner Anand Mehra. "It is clearly a space where there is a lot of interest from small, mid-sized and large companies and that is obviously something we like and pay attention to as investors."

-Lisa LaMotta (l.lamotta@elsevier.com)

Vicept Acquired By Allergan For $75M Upfront

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