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Valeant Pharmaceuticals (VRX - Analyst Report) recently suffered a setback when the US Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) to the company regarding its New Drug Application (NDA) for its anti-fungal candidate IDP-108 (efinaconazole).

Valeant Pharma filed the NDA for IDP-108 in the US in Jul 2012. Valeant Pharma is seeking FDA approval for IDP-108 for a potential new treatment of onychomycosis, a fungal infection of the fingernails and toenails, primarily in elders.

We note that Valeant Pharma obtained an exclusive license from Kaken Pharmaceutical Co., Ltd., to commercialize IDP-108 in North America, Central America, South America and the European Union.

In the CRL, the FDA has raised questions relating to Chemistry, Manufacturing and Controls (CMC) areas of the container closure apparatus.

As the FDA did not raise questions on the efficacy or safety profile of IDP-108, Valeant Pharma expects to address the CMC issues soon and subsequently respond to the CRL.

Meanwhile, the stock price of Valeant Pharma surged for the second consecutive day following the news of the company’s impending acquisition of eye-care company, Bausch + Lomb Holdings Incorporated, for $8.7 billion in cash.

We believe the acquisition of Bausch + Lomb will significantly strengthen Valeant Pharma’s ophthalmology business.

The acquisition should also enable Valeant Pharma to penetrate into the growing eye health market fueled by an aging patient population, an increased rate of diabetes, and increasing demand from the emerging markets. We note that Novartis (NVS - Analyst Report) is a leading player in eye care products and technologies with operations in 75 countries through its Alcon Division.

We expect investor focus to remain on updates of the impending acquisition.

Valeant Pharma currently carries a Zacks Rank #3 (Hold). Right now, Salix Pharmaceuticals (SLXP - Analyst Report) and Santarus, Inc. appear to be well placed with a Zacks Rank #1 (Strong Buy).

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