Valeant seeks pre­scrip­tion for growth in Mid-East, North Africa with ac­qui­si­tion


Valeant Phar­ma­ceu­ti­cals plans to ex­pand its reach in the Mid­dle East and North Africa af­ter reach­ing a deal to buy an Egyp­tian phar­ma­ceu­ti­cal com­pany for about US$800 mil­lion.

The Que­bec-based com­pany said it has a def­i­nite agree­ment to buy Amoun Phar­ma­ceu­ti­cal from Mer­cury (Cay­man) Hold­ings.

The deal in­cludes Amoun’s man­u­fac­tur­ing plant, which would add to Valeant’s 40 man­u­fac­tur­ing plants around the world.

Egypt’s phar­ma­ceu­ti­cal in­dus­try has grown from un­der US$5 bil­lion to US$21 bil­lion in a decade, said an­a­lyst Dou­glas Miehm of RBC Cap­i­tal Mar­kets, who char­ac­ter­ized the deal as “slightly pos­i­tive” for Valeant.

He said the ac­qui­si­tion isn’t a sur­prise given re­cent media re­ports about the pos­si­bil­ity of such a deal and fol­lows CEO Michael Pear­son’s in­ter­est to ex­pand into emerg­ing mar­kets in Asia and the Mid­dle East.

Valeant (TSX:VRX) said emerg­ing mar­kets are ex­pected to ac­count for about 20 per cent of its rev­enues in 2015, in­clud­ing 10 per cent from Eastern Europe, Africa and the Mid­dle East.

Miehm said Amoun’s con­tri­bu­tion to Valeant’s re­sults will grow over the next three years. He es­ti­mates it should gen­er­ate one to two per cent earn­ings growth, or 15 to 30 cents per share.

Amoun has sales ex­pected to reach about US$223 mil­lion this year. It has more than 30 branded prod­ucts, in­clud­ing those for an­i­mal health and the treat­ment of hy­per­ten­sion, in­fec­tions and di­ar­rhea.

If the trans­ac­tion closes as planned in the third quar­ter, it will be Valeant’s big­gest ac­qui­si­tion since it paid US$11.1 bil­lion to buy Salix Phar­ma­ceu­ti­cals. That deal closed April 1 af­ter a bid­ding war with Ir­ish ri­val Endo In­ter­na­tional.

Valeant is one of Canada’s largest com­pa­nies by mar­ket cap­i­tal­iza­tion. The com­pany is ex­pected to re­port next week a more than tripling of net prof­its to US$426.2 mil­lion in the sec­ond quar­ter on a 25 per cent in­crease in rev­enues to US$2.5 bil­lion, ac­cord­ing to an­a­lysts polled by Thom­son Reuters.

Ad­justed prof­its ex­clud­ing one-time items are forecast to reach US$863.3 mil­lion or US$2.46 per share.

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