Ryan Remiorz/The Canadian Press
Valeant Pharmaceuticals International Inc. briefly surpassed Toronto-Dominion Bank's position as Canada's second-largest stock as the two jockey for position behind leader Royal Bank of Canada.
Valeant, the top performer in Canada's benchmark equity gauge this year, surged as much as 3.4 per cent in Toronto trading on Thursday, boosting the company's market capitalization to $104.3-billion, ahead of Toronto-Dominion's $104.1-billion at the time.
The two companies ended the day at near-identical valuations of $102.4-billion, with Toronto-Dominion clinging to a $17-million lead. Valeant closed 0.8 per cent higher to extend an all-time high at 4 p.m. in Toronto, while Toronto-Dominion declined 1.1 per cent. The drugmaker has surged 81 per cent this year, while the lender has lost 0.3 per cent.
Valeant climbed after its Xifaxan drug received approval from the U.S. Food & Drug Administration yesterday for use in adults with irritable bowel syndrome.
Toronto-Dominion, the nation's second-largest lender, stumbled after second-quarter net income fell 6.5 per cent as the bank took a $228-million restructuring charge. The company said it took measures to cut costs and manage expenses, and reported 330 fewer employees compared with the first quarter.
Royal Bank of Canada, the largest lender, remains the largest company in the Standard & Poor's/TSX Composite Index with a $115.5-billion valuation.
Toronto-Dominion is the latest company Laval, Quebec-based Valeant has caught up to during its ascendancy amid almost $100-billion of deals in the pharmaceutical and biotechnology space in the first quarter.
"Every time they grow they have to buy something bigger," said David Cockfield, a fund manager at Northland Wealth Management in Toronto. His firm manages about $325-million. "It's a system that can only work for so long. Valeant's now at the same level as the two biggest banks in Canada. That should give you some pause."
Michael Pearson, chief executive officer, is seeking to make Valeant one of the world's biggest drug companies, largely through acquisitions.
"There's a deal frenzy going on," Mr. Pearson said in an interview on May 21. "We're consistently looking for good deals."
Valeant is in talks to acquire Amoun Pharmaceutical Co., one of the largest drugmakers in Egypt, according to people with knowledge of the matter, Bloomberg reported May 20. Valeant, backed by activist investor Bill Ackman, pursued Allergan Inc. in 2014. Mr. Ackman's Pershing Square Capital Management is the company's third-largest investor, data compiled by Bloomberg show.
Valeant has accounted for 60 per cent of the benchmark Canadian equity index's advance in the 12 months through May 8, according to data compiled by Bloomberg. Over five years, Valeant's 16-fold gain made up about a fifth of the S&P/TSX's advance.
Valeant climbed past Bank of Nova Scotia in February after surpassing others including Canadian National Railway Co., Enbridge Inc. and Bank of Montreal over the past 12 months, according to data compiled by Bloomberg.
Valeant is the best performing stock in the S&P/TSX this year, followed by Concordia Healthcare Corp. The companies are leading gains by Canadian health-care stocks ahead of U.S. peers, largely skipping the costly research and development process for drugs and buying drugmakers that have retail-ready products. They then expand earnings by cutting costs.