Healthcare-focused Avista Capital buys G&W Labs’ dermatology business

  • Recent exit of MPI produced 3x return; 67 pct IRR
  • New platform is eighth investment out of Fund IV, which closed at >$800 mln in ’17
  • G&W Derm portfolio: ~35 generic topical products currently sold in U.S.

Avista Capital Partners has struck a deal to purchase the extended topicals and dermatology business of G&W Laboratories, Buyouts has learned.

G&W, which has remained family-owned and -operated since it was founded in 1919, will continue to operate its remaining businesses, including contract-manufacturing operations in Sellersville, Pennsylvania, and Lincolnton, North Carolina.

For New York’s Avista, the new platform represents the eighth investment out of its first healthcare-exclusive fund, Fund IV. The pool closed in 2017, collecting more than $800 million, a source said.

Walt Kaczmarek, who most recently served as COO of Aceto, will hold the CEO post at G&W Dermatology.

Kaczmarek previously held leadership roles at Mallinckrodt Pharmaceuticals, Fougera Pharmaceuticals and Nycomed. Fougera and Nycomed are both former Avista portfolio companies.

G&W Dermatology includes some 35 generic topical dermatology products marketed and sold in the U.S.

The company also acts as a contract manufacturer for select products owned by other pharmaceutical companies, operates a manufacturing facility, and has an established R&D team and an active pipeline in various stage of development.

Avista, founded in 2005 as a spinout from DLJ Merchant Banking, has been both an active buyer and seller of late.

While the firm less than two weeks ago took Osmotica Pharmaceuticals public, its most recent sale involved preclinical contract-services provider MPI Research.

Through the about $800 million sale of MPI to Charles River Laboratories in April, Avista scored a 3x return on investment and 67 percent IRR, according to a source familiar with the matter.

The sale of MPI, which was Avista’s first investment out of Fund IV, came less than two years after its investment in the company.

The Avista team has deep roots in the broader outsourced pharma services industry, as well as in pharmaceuticals, medical devices and consumer-driven products.

Over the past 24 years, Avista’s 25 realized healthcare investments have averaged a 3.4x gross ROI and 31 percent IRR, the source said.

In one example that represents the PE execs’ deep roots in healthcare, Avista Co-Managing Partners Thompson Dean and David Burgstahler are more than familiar with Charles River through their days leading various healthcare transactions at DLJ Merchant Banking.

DLJ in September 1999 bought Charles River from Bausch & Lomb alongside management and it was taken public shortly thereafter, in June 2000.

The deal was considered a huge success for DLJ. Forbes reported in 2002 that DLJ, then part of Credit Suisse First Boston Private Equity, had sold its stake in Charles River for $380 million, or more than quadruple what it paid three years earlier.

In other notable pharma-services activity, the firm in November 2014 executed the $150 million IPO of clinical CRO INC Research.

More recently, Avista in August agreed to invest $92 million in the merger of Avista Healthcare Public Acquisition Corp, a blank-check company it backs, and wound-care biotech Organogenesis.

Avista in May acquired Kramer Laboratories, an OTC foot care and specialty cough products company, alongside Dana Holdings. In February, it agreed to sell Zest Dental Solutions to BC Partners.

G&W Labs turned to JP Morgan Securities for financial advice on the transaction, while Reed Smith offered legal counsel. Avista’s legal adviser is Ropes & Gray.

Action Item: Check out Avista’s Form ADV here: https://bit.ly/2us948i