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Analyst Blog

Continuing with its strategy of making acquisitions and thereby expanding its portfolio Valeant Pharmaceuticals International, Inc. (VRX - Analyst Report) recently purchased US-based, privately owned specialty pharmaceutical company, Pedinol Pharmacal, Inc.

The deal, expected to boost Valeant’s earnings immediately, is worth less than one and half times the sales recorded by Pedinol Pharma, a drug maker focused on foot-related disorders, in 2011. Pedinol Pharma’s 2011 revenues came in at approximately $18 million.

The addition of the products from Pedinol will augment Valeant’s strong dermatology business given the similar features prevalent in the dermatological and podiatry businesses. The acquisition is a positive for Valeant Pharma as apart from expanding its product portfolio, the company will benefit from the erstwhile Pedinol Pharma’s experience in marketing podiatry-related products.

We note that Valeant Pharma is on a deal signing/acquisition spree to expand its business. In March 2012, Valeant Pharma inked a deal to purchase Russian specialty pharmaceutical company Natur Produkt.

During the same month, Valeant Pharma signed a couple of more deals. The company inked a deal to acquire certain branded generic assets from Austrian pharmaceutical company, Gerot Lannach. Furthermore, Valeant Pharma bought a 19.9% stake in Brazilian biotech company, Pele Nova Biotecnologia S.A.

In February 2012, Valeant Pharma announced its intent to acquire Eyetech, Inc., a private eyecare company. The Eyetech offer came on the heels of Valeant’s failure to acquire another eyecare company, California-based ISTA Pharmaceuticals in January 2012.

We remind investors that in 2012, Valeant Pharma kicked off its acquisition spree with the acquisition of Brazilian sports nutrition and food supplements company Probiotica Laboratorios Ltd.

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.

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