Valeant expects to be a global leader in dermatology with latest acquisition

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Valeant Chief Executive Michael Pearson and Valeant Canada President Thomas Schlader pose for photos before the company's annual meeting Wednesday, May 30, 2012 in Laval, Quebec. The pharmaceutical company says it plans to grow by focusing on niche markets such as dermatology that aren't being eyed by big pharmaceutical companies. (RYAN REMIORZ / THE CANADIAN PRESS)

MONTREAL - Valeant Pharmaceuticals International Inc. expects to strengthen its position as a global leader in dermatology products with the $2.6-billion acquisition of U.S.-based Medicis Pharmaceutical Corp.

Valeant (TSX:VRX) has agreed to pay $44 per share for Medicis in a $2.6-billion cash deal, the Quebec-based company said Tuesday. That's a 39 per cent premium over Friday's closing price of $31.87 for the Scottsdale, Ariz. company.

Shares in Valeant surged almost 15 per cent, or up $7.47, to $57.94 on Tuesday at the Toronto Stock Exchange.

Valeant CEO Michael Pearson said his company had been looking at acquiring Medicis for the last 18 months.

"Importantly, this combination represents a significant next step in our journey to become a global leader in dermatology, strengthening our presence in medical dermatology and bringing us to critical mass in esthetics," Pearson said during a conference call.

Medicis' portfolio complements Valeant's portfolio, he said, citing the areas of acne medication and injectable dermal fillers in esthetic products.

"We look forward to leveraging Medicis, a well-known and respected name in dermatology, to drive long-term growth," Pearson told analysts.

The boards of both companies have approved the deal but the takeover needs the approval of Medicis shareholders as well as regulatory clearance. The companies hope to complete the transaction in early 2013.

The combined company's commercial dermatology operations would be based in Scottsdale and will operate under the Medicis name, the companies said. Its research and development operations would operate in Canada, Arizona and California. Corporate support functions would be based mostly in New Jersey.

The chairman and CEO of Medicis, Jonah Shacknai, called the offer compelling and said the combined portfolio of products under the Medicis name would be enable the combined company to capitalize on opportunities in the markets for dermatology and esthetic treatment products.

Medicis' prescription brands include Solodyn, Perlane, Ziana and Dysport.

Valeant said it expects the deal to immediately add to its earnings and begin producing annual cost savings of at least $225 million within six months of the deal closing.

Pearson said when Valeant starts integrating Medicis' personal, "we intend to select the best-of-the-best in order to build a stronger organization."

RBC Capital Markets analyst Douglas Miehm noted that Medicis is a large dermatology and esthetics Player with leading brands.

"As a result, Valeant management expects the acquisition to be a solid strategic fit. Not surprisingly," Miehm wrote in a research note.

"Valeant’s derm division will take on the Medicis name. Valeant's pro-forma 2012 revenues for the combined dermatology business should be more than $1.7B."

Valeant, Canada's largest publicly traded drug company formed from the combination of California-based Valeant and the former Biovail, reported a $21.6-million net loss in the second quarter, largely as a result of restructuring and acquisition charges.

The results also included a $53.6-million charge related to the settlement of a class-action anti-trust complaint.

Valeant has now made more than a dozen acquisitions this year, including iNova, which sells and distributes a range of prescription and over-the-counter products in Australia, New Zealand, Southeast Asia and South Africa.

It also acquired Dermik, a dermatological unit of Sanofi in the U.S. and Canada that manufactures, markets and sells a range of therapeutic and aesthetic dermatology products.

Last year, it bought Edmonton-based Afex Life Sciences, maker of the over-the-counter cold and flu remedy Cold-FX.

In April, Valeant announced it would move its global headquarters to Quebec to focus on over-the-counter dermatology products. It's also setting up a research and development centre for consumer dermatology in Laval, which is north of Montreal.

Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of products primarily in the areas of neurology, dermatology and branded generics.