Valeant Ups ISTA Bid

Canadian pharmaceutical company Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has raised its bid for ISTA Pharmaceuticals Inc. (ISTA - Snapshot Report) to $7.50 from $6.50 per share in cash. Valeant Pharma also offered to increase the offer to $8.50 per share if ISTA offered it some confirmatory due diligence information. Valeant Pharma added that the offer remains valid till January 31, 2012.

Valeant Pharma made a hostile bid to acquire ISTA in December 2011 with an offer of $6.50/share in cash or a total value of $327 million. California-based ISTA rejected the proposal the very same day. ISTA’s Board of Directors called the offer unrealistic stating that the offer grossly undervalues the company. Valeant Pharma had initially approached ISTA with its $6.50 per share offer in October last year. The offer was ignored by ISTA then, which led Valeant Pharma to make the hostile bid in December.

ISTA management announced that it will review the revised Valeant proposal. It is also discussing with other parties interested in entering into a strategic transaction with ISTA. The company is currently conducting a strategic review process which was announced in mid-December 2011.

With this acquisition, Valeant Pharma is looking to establish its presence in the ophthalmic field. Valeant Pharma currently focuses on neurology, dermatology, and branded generics.

Our Recommendation

We currently have a Neutral long-term recommendation on Valeant Pharma. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

Valeant Pharma, as it stands today, was formed following the merger of Biovail and Valeant in September 2010.  We believe the combined Biovail/Valeant entity is a unique company as it has a global reach (including exposure to important emerging markets), a diversified revenue base, a favorable tax structure and limited patent exposure. Moreover, accretive acquisitions add to the company’s investment thesis.

Read the full analyst report on VRX

Read the full analyst report on ISTA