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Valeant snaps up Medicis for $2.6-billion

Valeant Pharmaceuticals International CEO Michael Pearson

Ryan Remiorz/THE CANADIAN PRESS

Laval, Que.'s Valeant Pharmaceuticals International Inc. is sweeping up a U.S. company for $2.6-billion (U.S.), the latest step in an acquisition spree that has seen it make 15 deals this year.

Canada's largest publicly traded pharmaceuticals firm announced Monday that it had agreed to take over Medicis Pharmaceutical Corp. of Scottsdale, Ariz., a maker of skin-care products.

Medicis has a wide stable of dermatology products that will complement Valeant's existing products, Valeant chief executive officer J. Michael Pearson said. "We've stated often that our aspiration was to become a leader in the dermatology field," Mr. Pearson said. "This company sits squarely in that field."

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The move marks another milestone in the radical transformation of a business once known as Biovail Corp., the pharmaceutical company once controlled by Ottawa Senators owner Eugene Melnyk. Valeant and Biovail agreed to merge in 2010 and the company that exists today is virtually unrecognizable from the one Mr. Melnyk ran, with a new focus and a new headquarters in the Montreal region, to which it moved earlier this year from Mississauga.

Taking over Medicis gives Valeant access to the company's range of therapeutic and aesthetic products, including oral acne medication Solodyn, as well as Dysport, an anti-wrinkle injection that rivals Botox. Valeant's dermatology products include various acne medications, including Acanya and Atralin, and a variety of skin creams.

The deal, valued at $44 a share, was approved by both companies' boards of directors and is expected to close by mid-2013.

Including the Medicis deal, Valeant's acquisitions this year alone total more than $3.5-billion. They range from Richmond Hill, Ont., supplement maker Swiss Herbal Remedies Ltd. to the U.S.-based foot disorder treatment company Pedinol Pharmacal Inc., although none reach the price of the Medicis acquisition. The most comparable transaction the company has made was its 2010 merger with Mississauga's Biovail Corp., valued at $3.2-billion.

The company also took over Edmonton's Afexa Life Sciences Inc. in 2011 for about $88-million, bringing its popular Cold-FX flu treatment product into the Valeant portfolio.

Mergers and acquisitions are Valeant's bread and butter. The company shuns the heavy investments in research and development that are common in most of the industry.

Mr. Pearson insists R&D "is not a good use of shareholder money." Instead, Valeant looks for companies with trusted products already on the market and works to acquire them, minimizing risk by "using M&A as a surrogate for R&D."

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Some of Valeant's other areas of focus are neurological and branded generic drugs.

Valeant is planning to reflag all of its skin care products under the newly acquired Medicis name to take advantage of its recognition in the marketplace. While Valeant's skin care products are largely therapeutic, Medicis will significantly expand their cosmetic product portfolio with products like Dysport.

"The whole world continues to age," Mr. Pearson said. "More people are spending money to continue to look and feel young."

Valeant posted a $21.6-million loss in the second quarter of 2012 as a result of its numerous acquisitions as well as $53.6-million in legal costs relating to a class-action lawsuit.

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