Valeant Pharmaceuticals International, Inc. (VRX) announced yet another acquisition deal recently. This time Valeant Pharma has entered into a deal to acquire iNova from Australian private equity firms Archer Capital and Ironbridge. iNova pharmaceutical group develops and markets prescription and over-the-counter (OTC) pharmaceutical products in the Australia, New Zealand, Southeast Asia and South Africa.
Valeant Pharma will pay shareholders of iNova 625 million Australian dollars as upfront payment. iNova shareholders will also be entitled to receive potential milestone payments of an additional A$75 million depending on the pipeline success. iNova’s product portfolio includes therapeutic weight management brands such as Duromine in addition to cold and cough OTC medicines like Difflam and Duro Tuss. The deal is expected to be immediately accretive and is subject to certain closing conditions.
Of late, Valeant Pharma has been on a buying spree. In late October, 2011, Valeant Pharma bought 81.6% of the outstanding common shares of another Canadian company Afexa Life Sciences Inc. Valeant Pharma paid 0.85 Canadian dollars for each common share of Afexa hoping the buy will synergize well with Valeant Pharma’s Canadian OTC franchise. In mid-August 2011, Valeant Pharma completed the acquisition of Lithuania-based specialty pharmaceuticals company Kaunas, which is expected to boost Valeant Pharma’s European branded generic portfolio.
In July 2011, Valeant Pharma announced acquisitions that would entrench its already strong presence in the dermatology market in the US. Valeant Pharma intends to acquire the assets of Ortho Dermatologics, a dermatology unit of pharma giant Johnson & Johnson (JNJ), for $345 million in cash. Valeant Pharma also announced that it intends to acquire Dermik, a dermatology unit of Sanofi Aventis (SNY), in the US and Canada. Valeant Pharma intends to close both the Dermik and Ortho Dermatologics acquisitions by the end of the year.
Our Recommendation
The stock carries a Zacks #2 Rank (Buy rating) in the short run.
Valeant Pharma in its current form emerged from the merger of Biovail and Valeant in September 2010. Overall, we believe the combined Biovail/Valeant entity is a unique company as it offers global reach, a diversified revenue base, a favorable tax structure and limited patent exposure. Moreover, accretive acquisitions add to the company’s investment thesis.
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