Valeant To Buy Salix

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Valeant Pharmaceuticals
The head offices of Valeant Pharmaceuticals International Inc. are seen in Laval, Quebec. Reuters/Christinne Muschi

Valeant Pharmaceuticals said it will buy Salix Pharmaceuticals for $10 billion. The Quebec-based company said it would pay $158 per share for Salix. The deal will take Valeant into the multibillion dollar market for drugs treating stomach disorders like traveler’s diarrhea. Valeant estimates the United States market for stomach disorder treatments to be about $5 billion and growing at 5 percent per year. The deal will double Valeant’s debt to $31 billion.

In November 2014, Salix revealed a revision to its wholesale inventory levels, suggesting that demand for its drugs might not be as high as previously thought. Recently, the company’s chief financial officer and chief executive have left. Valeant expects to lose about $500 million in sales in 2015 as distributors reduce drug inventory levels to adjust for accounting issues.

Valeant sells eye and skin drugs. Valeant’s fourth quarter results showed that the company is building its own business substantially. Valeant reported total revenue of $8.3 billion in 2014, a growth of 43 per cent over the previous year. Valeant will report results from recent acquisitions like Salix separately to show how underlying business is doing. It will continue to focus on small and midsize deals. In the past few weeks, Valeant moved to buy prostate cancer treatment Provenge and other assets from bankrupt Dendreon Corp for $495 million.

Salix’s bestselling product is an antibiotic called Xifaxan for traveler’s diarrhea. It is up for US Food and Drug Administration approval. It could add $1 billion a year in yearly sales. However, it could face competition from an Actavis drug that is also up for approval. AstraZeneca and Shire too are in the stomach disorder market. In 2014, Salix, won approval for three drugs. The company had about $1.1 billion in total net product revenue during the first nine months of 2014. Valeant recently failed to buy botox maker Allergan which was bought by Actavis for $66 billion.

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