Connetics Corporation, a specialty pharmaceutical company that develops and commercializes dermatology products, will acquire the sales organization of PediaMed Pharmaceuticals, Inc., a privately held pharmaceutical company, for $12.5 million in cash.

The transaction is expected to close on January 31, 2006 and PediaMed's sales representatives and managers will become Connetics employees effective February 1, 2006. Currently, PediaMed's sales force is structured with 80 territories and 11 sales managers who call on approximately 8,000 paediatricians nationwide. PediaMed's President and Chief Executive Officer, Cameron Durrant, will become a consultant to Connetics, stated a release.

"We believe the addition of this experienced, highly focused sales team is a great strategic fit with our existing sales organization and product portfolio. We see significant opportunity for our dermatology products in the paediatric market, particularly acne treatments and low to mid-potency topical steroids," Thomas G. Wiggans, chairman and chief executive officer of Connetics said adding, "This transaction is a cost-effective way to leverage our commercial platform in an important market where we currently have limited presence."

Following a one-month training program that begins with the Connetics' national sales meeting in early February, the group will begin selling Evoclin (clindamycin) Foam, 1%, a topical treatment for acne, and Luxiq (betamethasone valerate) Foam, 0.12%, a topical steroid for dermatoses. Desilux (desonide) VersaFoam-EF, 0.05%, a low-potency topical steroid formulated to treat atopic dermatitis, is Connetics' first drug candidate seeking a pediatric label. Connetics expects to add Desilux to the group's portfolio upon US FDA approval, currently anticipated in September 2006. The acquisition does not include any commercial products currently sold by the PediaMed sales organization, or rights to any products developed by PediaMed.

Connetics expects the acquisition of the PediaMed sales organization and a modest contribution from Ventiv activities to add $6 million to $7 million in product revenues in 2006, and $14 million to $15 million in expenses.

In December 2005, Connetics amended its license agreement with Astellas Pharma Europe B.V. (formerly Yamanouchi Europe B.V.) for Velac (a combination of 1% clindamycin and 0.025% tretinoin) Gel to include all worldwide territories. Connetics' initial license in 2002 for Velac was limited to the United States, Canada and Mexico. Under the terms of the amended agreement, Connetics paid Astellas an undisclosed upfront license fee in the fourth quarter of 2005. Connetics will make an additional milestone payment to Astellas upon FDA approval of Velac, and will pay a portion of revenue from any sublicense agreement and royalties on product sales outside of North America, added the release.