Skin patch manufacturer could sell for $1.6 billion

Manufacturing transdermal patches is a growing niche that a lot of contract manufacturers would like to have expertise in. LTS Lohmann, which Novartis ($NVS) owns a big piece of, has that expertise and so is reportedly attracting bids of about $1.6 billion from private equity investors who want to ride that wave.

Sources tell Reuters private equity investors Wendel and Nordic Capital are the two bidders left standing after investment groups Blackstone, KKR and EQT, as well as Japan's Hisamitsu Pharmaceutical, all dropped out. The news services said that Blackstone was looking to combine LTS Lohmann with its drug contract manufacturing subsidiary Catalent, while KKR would have married it with its hard capsules maker Capsugel. For Nordic Capital, buying LTS Lohmann would offer the opportunity to merge its operations with a skin-patch maker it bought last month. Nordic and private equity partner Avista Capital Partners together bought Switzerland-based Acino, which turns out a birth-control patch for Bayer, among other products.

Novartis and its partners put the patchmaker, based in Andernach, Germany, up for sale earlier this year. Novartis, which is looking to unload some of its ancillary assets, owns a 43% stake in LTS Lohmann, German billionaire Dietmar Hopp, 30% and German investment company BWK about 24%. Preliminary bids were due last month.

Drugs delivered via skin patch have become popular as drugmakers turn to them as a new way to sell old products. They're typically used for delivering painkillers, nicotine and hormonal birth control. But other drugmakers are using them for more novel treatments, like Novartis' Excelon patch for treating Alzheimer's disease. There has recently been a spate of new and expanded manufacturing facilities targeted at producing skin patches. Generics maker Mylan ($MYL) opened an 85,000-square-foot, three-story expansion project in September at its transdermal patch facility in Vermont. Swiss drug delivery specialist Acino last year opened a $24.7 million plant it built at its Miesbach, Germany, site to produce a birth control patch from Bayer.

According to Reuters, LTS, which created the first nicotine patch for the U.S. market in 1991, has annual sales of about €286 million ($387.5 million). Its products range from nicotine patches, to patches that deliver drugs for treating Parkinson's and restless legs syndrome.

- read the Reuters story