Allied Finds A Friend In Pharma –

Armed with a $77 million subordinated debt infusion, Allied Capital Corp. (NYSE:ALD) acquired a controlling interest in Spear Pharmaceuticals Inc., a pharmaceutical company that will become part of Allied platform Triax Holdings LLC. The financing provided by the Washington, D.C.-based business development company (BDC), represented about 58% of the total $133 million acquisition cost. The transaction closed earlier this month.

The remaining $56 million of the deal’s financing came in the form of senior debt provided by Callidus Capital Finance LLC, which plans to syndicate a portion of the facility.

Spear Pharmaceuticals markets and distributes generic equivalents of prescription dermatologic medications to national wholesalers, drug store chains and regional and specialty distributors. The company boasts of having the only complete line of Tretinoin – the generic equivalent of Retin-A, a branded topical prescription acne medication.

“There have been a number of new drugs released over the years that fit well within the dermatologic space and make it a strong industry to invest in,” John Shulman, a managing director at Allied, told Buyouts. “Dermatology has a more encompassing presence than it once had because it’s not only focused on [skin] problems any more – it’s also focused on trying to look younger and better.”

Triax was formed to acquire and develop specialty pharmaceutical products with a focus on dermatology. Earlier this year, the company won a William Blair & Co.-run auction for Spear and contacted Allied to help finance the deal and to secure capital for growth initiatives down the road, Shulman said. Triax is led by pharmaceutical industry veterans, Joseph Krivulka and Leonard Mazur. Krivulka hails his most recent experience as co-founder and president of Reliant Pharmaceuticals Inc., while Mazur was president and CEO of Genesis Pharmaceutical Inc. Both Krivulka and Mazur invested undisclosed amounts of equity into this transaction.

To add value to Spear, Allied will focus on increasing and expanding distribution of the company’s existing product line, Shulman said, adding that the firm will also look into the possibilities of product extensions. The end game for Triax, as a whole, includes the acquisition of additional generic and branded dermatologic pharmaceutical products with competitive market positions over the next several years, Shulman said. He declined to comment on whether Allied or Triax had any future acquisitions earmarked, noting: “All we are focusing on at the moment is building a great company and backing an experienced management team over the long haul.”

The acquisition of Triax represents the second pharmaceutical holding company acquired by Allied in the last seven months. In late December, the firm completed the buyout of over-the-counter drug company Insight Pharmaceuticals Corp. for approximately $155 million. The Blue Bell, Pa.-based company’s list of products include the pain reliever Anacin, Sucrets throat lozenges, Allerest, a medication for colds and allergies and N’Ice cough suppressants and lozenges.

“We’ve had a good bit of experience within the regulated drugs space and the growth that the market has to offer,” Shulman said. “In particular, we look forward to the growth we see as inherent with the dermatological sector and to the excellent potential exhibited by the acne-related medications.”

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