Allergan's Unblemished Deal

Less than a week after announcing plans to beef up its medical cosmetics business, Allergan (NYSE: AGN) made another bold move yesterday: acquiring the rights to QLT's (Nasdaq: QLTI) acne drug Aczone.

Aczone has been approved for marketing in the U.S. since 2005. But a strict warning label and onerous testing requirements led former partner Astellas to return Aczone's rights to QLT, which in turn never bothered to market it.

Instead, QLT spent the following years working on studies to improve Aczone's label, in hopes of improving its competitive odds in the more-than-$800 million market for prescription acne treatments. Earlier in the year, after it got the FDA to lift the restrictions on the drug's use, QLT announced plans to sell the compound.

QLT's deal with Allergan exchanges worldwide rights to Aczone for $150 million in cash. If Allergan can use its extensive dermatology marketing muscle and capture even a fifth of the prescription-drug acne treatment market, it should reap a profit until Aczone's patents start to expire in 2016.

Earlier in the year, I put Aczone's value to QLT at anywhere from $50 million to $100 million, accounting solely for U.S. marketing approval. Last week, QLT got the testing requirements removed in Canada as well, which definitely adds some incremental value. Even without that bonus, though, getting $150 million for a compound it never had any plans to market sounds to me like a good deal for QLT.

QLT has been slowly breaking apart its operations, after competitive woes battered its lead drug. The company's also trying to sell off its remaining rights to prostate-cancer hormone treatment Eligard, marketed by Sanofi-Aventis (NYSE: SNY) in the U.S. Once that's done, QLT will essentially become a one-drug company, with most of its future success dependent on whether it and its partner Novartis (NYSE: NVS) can meaningfully improve the fortunes of its macular-degeneration treatment Visudyne.