The boards of Valeant and Biovail have agreed to a cash and shares-based merger through which Valeant stockholders will receive $16.77 per share and 1.7809 Biovail shares in exchange for each of their Valeant shares.
The firms claim the marriage should allow the generation of at least $175 million in annual cost synergies by the second year of merged status. Based on figures at the end of March 2010, Valeant Pharmaceuticals would have had pro forma revenues of $1.75 billion and pro forma cash flow from operations of $575 million. The combined entity will be called Valeant Pharmaceuticals International and retain Biovail’s corporate structure. It will be headquartered at Biovail’s existing headquarters in Ontario.
The companies maintain Valeant Pharmaceuticals will have a significantly expanded presence in North America and operations in eight other countries. The new combined group aims to leverage its complementary product lines and operations in the fields of CNS and dermatology as well as the Canadian market and emerging markets for branded generics.
Valeant Pharmaceuticals will be headed by CEO J. Michael Pearson, who is currently chairman and CEO at the existing Valeant. The new board of directors will include five Biovail and five Valeant representatives, and one additional independent Canadian resident director who has yet to be appointed.
“This compelling combination will create tremendous value for stockholders of both companies as our business benefits from cost savings, greater scale, efficiencies from extending Biovail’s corporate structure, and enhanced financial strength and flexibility,” Pearson states.
The combined company will also retain Biovail's existing principal operating subsidiary in Barbados, which will continue to own, manage, control, and develop intellectual property for the combined company. The location of the combined company's U.S. headquarters will be determined after the close of the transaction.
Valeant’s major pharmaceutical product areas are in the fields of dermatology, neurology, and branded generics. The firm has been on something of an acquisitions spree this year. In May it completed the $318 million acquisition of Aton Pharma. During April Valeant’s Canadian subsidiary announced signing a C$10.5 million agreement to acquire Ontario-based OTC dermatology company Vital Science.
Also during April Valeant confirmed that it was to acquire a privately held branded generics and OTC pharmaceutical company in Brazil for $56 million. This deal represented Valeant’s second Brazilian acquisition in 2010. During March it announced the $28 million acquisition of dermatology-focused branded generics and OTC company Instituto Terapeutico Delta.
Biovail’s business strategy from the mid 1990s to 2008 was focused on the application of its drug delivery technologies to extend pharmaceutical product life cycles. In 2008, however, the firm expanded its strategic focus to include the development and commercialization of novel drugs for niche CNS disorders.
At the start of June Biovail paid Kyowa Hakko Kirin $10 million up front for U.S. and Canadian rights to commercialize new products containing the NCE istradefylline for the treatment of Parkinson disease. During March the firm negotiated certain Ampakine® compounds and IP from Cortex Pharmaceuticals for $9 million. The acquired compounds, for use in the field of respiratory depression, include the Phase II candidate CX717.
In Februrary Biovail dished up $40 million as part of collaboration and license agreement with Alexza Pharmaceuticals for U.S. and Canadian commercialization rights to the latter’s inhaled loxapine product, AZ-004, for the treatment of agitation in patients with schizophrenia or bipolar disorder. The drug, delivered using Alexza’s Staccato inhalation device, is currently undergoing FDA regulatory review.