Valeant primed for more deals: CEO
Michael Pearson’s penchant for acquisitions has helped catapult Valeant Pharmaceuticals International Inc. to the heavyweight ranks of the TSX Composite Index, and the company’s chief executive shows no signs of slowing down the deal flow.
Pearson said at Valeant’s annual shareholder meeting on Tuesday that he sees the world’s emerging middle-class markets in Asia, the Middle East and Latin America as prime growth territories.
“When you have a rise in income in markets, the per cent they spend on health care increases — so it’s a bet on the middle class,” said Pearson at a news conference at the company’s international offices in Laval.
Pearson says the company’s Asian division will pass $1 billion in revenue this year, and expects all units to grow at least 10 per cent annually.
“I would expect Asia to grow faster. We should be making acquisitions five years from now and maybe it should be $5 billion,” he said.
The multinational Valeant — formerly Biovail Corporation — develops, manufactures and markets a range of products, including overthe counter medications, prescription drugs and medical devices. It has logged more than 100 acquisitions since 2008, helping grow its revenue to $8 billion in 2014.
This month it completed the US$11.1-billion takeover of gastrointestinal disorders specialist Salix Pharmaceuticals Ltd.
Pearson says the company still has at least $6 billion in cash flow that it can use for acquisitions, and it plans to be active.
He would not comment on any specific future acquisitions, and said any deals would aim to respect the company’s commitment to reduce its leverage ratio to less than four times the equity.
“It depends on whether the acquisition helps or hurts from a leverage standpoint,” said Pearson. “It’s not the size, it’s what it does to our leverage ratio.”
Shares are worth 15 times their 2010 value, passing $277 on Tuesday.
Still, Pearson says he believes more gains are on the way.
“I believe we’re undervalued, significantly,” he said.
“If you look at our growth prospects and what our performance has been, if you look at our multiple, we’re not getting the growth premium,” said Pearson.
He says Valeant’s biggest issue is that most shareholders are quite concentrated and many have had to sell because they can only keep up to 20 per cent of their portfolio in one stock.
“Fortunately, other new investors have come in. Most of the people have not left the stock, they’ve just sold down,” said Pearson.
Billionaire hedge fund manager John Paulson more than tripled the size of his stake in Valeant in the first quarter.
His hedge fund Paulson & Co. owned a US$400-million position in the company as of March 31, up from under US$100 million at the start of the year.