Valeant Pharmaceuticals International continued building up the dermatology side of its business with the $285 million purchase of Dow Pharmaceutical Sciences Inc., a privately held company that specializes in development of topical products.

The purchase brings to Aliso Viejo, Calif.-based Valeant an acne product recently approved by the FDA - Acanya - and a pipeline of five dermatology product candidates, three of which are in Phase II development.

Those Dow products are for the treatment of rosacea, moderate to severe acne, fungal infections and common warts. Valeant said it expects one or more of those products to enter Phase III in 2009, with an expected launch in 2012.

Dow, of Petaluma, Calif., also does contract research and development in topical products. It has annual revenues of about $45 million, of which approximately $20 million comes from royalty payments from products already out-licensed.

Valeant Chairman and CEO J. Michael Pearson noted in a statement that Dow worked on 10 dermatology products that won FDA approvals in the past few years and has projects under way in eight of the top 10 dermatology diagnoses.

Under the terms of the agreement, Valeant will pay Dow $285 million, subject to 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, or $242 million net of cash.

In the six-month period following the closing, Valeant will fund an escrow account of $35 million, which will be subject to indemnification claims from Valeant for 18 months following the closing.

Also, Valeant will pay future milestones, based on the achievement of approval and commercial targets for products still in development.

The transaction has been approved by the boards for both companies and is expected to close by year-end.

Valeant started its acquisition spree in October when it purchased Coria Laboratories Ltd., a privately held specialty pharmaceutical company focused on dermatology products for $95 million.

That deal brought the company a stable of both prescription and over-the-counter products, plus a development pipeline.

Last month Valeant acquired DermaTech Pty Ltd., an Australian specialty pharmaceutical company in the dermatology field for about $12.5 million.

Prior to that, it signed a deal with GlaxoSmithKline plc, of London, to collaborate on the investigational drug retigabine for epilepsy, a deal that gave Valeant a $125 million up-front payment plus up to $545 million in future milestones. (See BioWorld Today, Aug. 29, 2008.)

On Tuesday the companies reported at the American Epilepsy Society meeting that Phase III results showed retigabine significantly reduced the number of seizures in adult patients with refractory partial-onset epilepsy when a 600-mg or 900-mg dose was added to a patient's current anti-epileptic drug therapy. Retigabine is a neuronal potassium channel opener.

In November 2007, Valeant initiated a Phase II trial of retigabine for the treatment of pain associated with PHN, a painful and common complication of shingles.

It also is developing a modified-release formulation to provide a more convenient dosing schedule, as well as evaluating the potential use of retigabine in treating other conditions.

Shares of Valeant (NYSE:VRX) dropped 27 cents Wednesday to close at $19.72.