November 13, 2015 / 10:25 PM / 3 years ago

Swedish drugmaker Meda could be hit by Valeant's pharmacy woes

NEW YORK/STOCKHOLM (Reuters) - Future royalty levels for one of Swedish drugmaker Meda’s most important drugs are uncertain after Meda confirmed to Reuters on Friday that its eczema cream Elidel was sold in the United States by pharmacy Philidor, which is due to cease operations by the end of January.

The licensing rights for Elidel in North America are held by Canada’s Valeant, which is cutting its ties with Philidor after scrutiny of its business practices and now faces disruption to its dermatology business.

Meda executives initially said at an earnings call last week that they were not aware of Meda products being sold through Philidor. However, a Philidor training manual reviewed by Reuters shows that Elidel and cold sore cream Xerese were sold through the speciality pharmacy.

A former Philidor employee who declined to be identified told Reuters that Elidel was one of its biggest products.

“Valeant has informed us that less than 20 percent of sales of those products licensed to them have been distributed by Philidor in the United States,” Meda spokeswoman Paula Treutiger told Reuters in response to questions over Philidor sales of its products but declined to comment on any potential impact on Meda from Valeant’s break with Philidor.

Representatives of Valeant and Philidor were not immediately available for comment.

Valeant does not report sales figures for Elidel and Xerese separately but has said that Philidor has accounted for about 7 percent of its total sales and that it was almost entirely focused on dermatology products.

Meda has received a guaranteed level of royalties from Valeant for its products but only until the end of this year, after which it will receive a percentage of actual sales, the company said at last week’s earnings call.

Valeant, which expects “significant” short-term disruption in its dermatology business after it cuts ties with Philidor, said it aims to put a new program in place within 90 days for selling its dermatology products.

The company expects the dermatology business to recover during the second half of next year, it added. Meda said it had received about $10 million of royalties from Valeant in the third quarter of the year, equal to more than half of its 156 million Swedish crowns ($18 million) of pretax profit in the quarter.

Elidel was Meda’s fourth-biggest seller globally in 2014. Sales outside North America amounted to 403 million crowns in January to September this year.

The drug is sold in 90 markets globally, either by Meda itself or through partners. In the United States, Canada and Mexico, Elidel is licensed to Valeant.

In the first nine months of this year, Meda, which has a market capitalization of $4.4 billion, had sales of 14.6 billion Swedish crowns and earnings before interest, tax, depreciation and amortization (EBITDA) of 4.9 billion crowns.

Editing by Ben Hirschler and David Goodman

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