VRX Bausch Health Cos

Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has acquired a 19.9% stake in Brazilian biotech company, Pele Nova Biotecnologia S.A. 

Valeant paid less than $10 million for the deal. As per the terms of the deal, Valeant will have representation on Pele Nova's Board of Directors, rights to future candidates in Brazil and first global product refusal rights. Additionally, Valeant will pay a reduced royalty percent on Regederm sales.

Regederm was included in Valeant’s portfolio post the acquisition of Instituto Terapeutico Delta Ltda. Regederm is approved in Brazil for wound healing and is expected to be launched in April 2012.

The company has made a number of acquisitions in the past few quarters. A few weeks ago, on February 13, 2012, Valeant had announced its intention to acquire Eyetech, Inc., a private eye care company, signaling management’s increasing interest in entering the ophthalmic space. The acquisition will add Eyetech’s drug Macugen to Valeant Pharma’s ophthalmic portfolio.

The Eyetech offer came on the heels of the Valeant’s failure to acquire another eyecare company, California-based ISTA Pharmaceuticals (ISTA) in January 2012.

In 2012, Valeant flagged off its acquisition spree with the successful acquisition of Brazilian sports nutrition and food supplements company Probiotica Laboratorios Ltd. Valeant announced that it has purchased Probiotica for R$150 million on February 1, 2012.

The Brazilian company reported net revenues of R$80 in 2011 with an outlook of double digit revenue growth in 2012. We believe this deal to be accretive for Valeant.  

Our Recommendation

We currently have a Neutral long-term recommendation on Valeant. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

 
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