Valeant to Buy SNY Dermatology Unit - Analyst Blog
12 July 2011 - 1:00AM
Zacks
Valeant Pharmaceuticals International, Inc.
(VRX) announced that it has entered into yet another deal that
would entrench its already strong presence in the dermatology
market in the US and Canada. This time Valeant intends to acquire
Dermik, a dermatology unit of Sanofi Aventis
(SNY), in the US and Canada.
Dermik’s product portfolio comprises of popular aesthetic as
well therapeutic dermatological brands like Benzaclin for the
treatment of acne, Carac for the treatment of keratoses and
Sculptra, a facial injectable for the correction of facial wrinkles
and folds. Under the deal, Valeant has also acquired the worldwide
rights to Sculptra. These products will synergize well with
Valeant’s dermatology products like Zorivax cream and ointment
(herpes), Acanya and Atralin (acne) among others.
The purchase consideration is approximately $425 million for all
Dermik assets, which includes available inventories of
approximately $18 million. Dermik’s inventories include an
aesthetic and therapeutic business in the US and Canada as well as
a global aesthetic business. Dermik’s 2010 revenues (including
contract revenues) were approximately $240 million. The deal is
expected to boost earnings right away in 2011.
The Dermik deal satisfies Valeant’s aim to capitalize on smaller
international opportunities. Valeant is keen on pursuing deals and
acquisitions in an effort to compensate for the loss of revenues
resulting from the genericization of neurology product Diastat and
dermatology cream Efudex.
Our Recommendation
We have a Neutral recommendation on Valeant Pharmaceuticals. Our
long-term stance is supported by the Zacks #3 Rank (Hold rating)
carried by the company in the short run.
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. Albeit, the company’s failure to clinch the
Cephalon (CEPH) acquisition disappointed us. We
therefore prefer to remain on the sidelines.
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