Valeant Buying JNJ Dermatology Unit - Analyst Blog
19 July 2011 - 1:15AM
Zacks
Canadian drug maker 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. This time around
Valeant intends to acquire the assets of Ortho Dermatologics, a
dermatology unit of pharma giant Johnson &
Johnson (JNJ), for $345 million in cash. The transaction
is expected to close by year end.
Ortho Dermatologics’ product portfolio, which comprises
prescription brands Retin-A Micro, Ertaczo, and Renova, generated
revenue of approximately $150 million in 2010. These products will
synergize well with Valeant’s dermatology products namely Zorivax
cream and ointment (herpes), Acanya and Atralin (acne) among
others.
The deal with Johnson & Johnson follows on the heel of last
week’s $425 million agreement to acquire another large
pharmaceutical company, Sanofi Aventis’ (SNY)
dermatology unit Dermik. These acquisitions satisfy Valeant’s aim
to become a leading player in the skincare market. Valeant is keen
on pursuing deals and acquisitions in an effort to compensate for
lost revenues from the genericization of its neurology product
Diastat and dermatology cream Efudex.
Our Recommendation
We have a Neutral recommendation on Valeant Pharmaceuticals. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
Valeant 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. However, the company’s failure
to clinch the Cephalon (CEPH) acquisition was a
disappointment. We therefore prefer to remain on the sidelines.
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