Valeant Pharmaceuticals International has signed a definitive agreement to acquire Dow Pharmaceutical Sciences, Inc., a privately held dermatology company that specializes in the development of topical products on a proprietary basis, as well as for pharmaceutical and biotechnology companies. The transaction significantly enhances Valeant’s dermatology franchise in the United States through the acquisition of a specialized dermatology research and development organization including a newly approved product and a robust pipeline of five dermatology products, three of which are in Phase II clinical development. Current annualized revenues are approximately $45 million, of which approximately $20 million represents royalty payments from products already out-licensed by Dow. Dow recently received approval from the FDA for Acanya(TM), a novel topical prescription medication indicated for the treatment of mild to moderate acne. Acanya(TM) is expected to be launched in the United States in early 2009. Dow has products in clinical development for the treatment of rosacea, moderate to severe acne, fungal infections and common warts. We expect one or more products to enter a Phase III trial in 2009, with an expected launch as early as 2012. In addition, Dow operates a well-regarded topical products services business dedicated to working with external sponsors for the formulation and development of topical therapies. Under the terms of the agreement, Valeant will pay Dow $285 million, subject to certain closing adjustments. Approximately $8 million in cash will be retained from current Dow accounts, making the net amount paid $277 million. Valeant will make the first payment of $250 million upon closing ($242 million net of cash). In the six month period following closing, Valeant will fund an escrow account of $35 million, which will be subject to indemnification claims from Valeant for a period of eighteen months following closing. The transaction is expected to be accretive in 2009. Additionally, Valeant will pay future milestones, based predominately on the achievement of approval and commercial targets for certain pipeline products still in development. The transaction was approved by the boards of directors for both companies and is subject to customary closing conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. The transaction is expected to close at year end. “This acquisition grows our scale and capabilities in dermatology thus solidifying Valeant’s future as a leading company in the development and commercialization of dermatology medications,” stated J. Michael Pearson, chairman and chief executive officer. “Gordon Dow, the founder of Dow Pharmaceutical Sciences, and his team are highly regarded with innovative formulation and development expertise, exemplified by having worked on ten dermatology approvals from the FDA in the past few years and with projects underway in eight of the top ten dermatology diagnoses. We are excited that they will be joining the Valeant team as we believe the synergies between our newly acquired Coria franchise and Dow’s business will provide sustainable growth for many years to come.”