While Regulators Investigate, Valeant Eyes the Contact Lens Market
October 29, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Reports indicate that Canadian company, Valeant Pharmaceuticals International Inc. , is taking steps to dominate the specialty contact lenses market.
Valeant, dubbed a “serial acquirer,” has a business model of buying up companies. It has acquired more than 100 companies since 2008, and has bought about eight this year alone. In September 2015, it acquired Synergetics USA for $6.50 per share in cash.
In July, it acquired Mercury (Cayman) Holdings, the holding company of Amoun Pharmaceuticals, as well as Largo, Fla.-based Unilens Vision Inc. Also in July, it signed a development and commercialization deal with Waltham, Mass.-based Eyegate Pharmaceuticals, Inc. In April, it bought Salix Pharmaceuticals, Ltd. and in February, acquired Seattle-based Dendreon Corporation .
In 2013, Valeant acquired Bausch & Lomb for $8.7 billion. At that time, Bausch and Lomb made about 75 percent of the basic component of rigid gas permeable lenses, reported Reuters. Those basic components are called “buttons,” which are then customized by specialty laboratories.
In May, Valeant acquired Paragon Vision Sciences, which increased that market share to about 80 percent. Rigid contact lenses make up about 10 percent of the contact lens market and are primarily for people who can’t wear soft lenses for one reason or another.
The Paragon buy gave Valeant and Bausch and Lomb total control of the market for Ortho-K buttons, which are used to manufacture a specific type of gas permeable lens. They generate about $5 million annually for Valeant.
According to Reuters, the U.S. Federal Trade Commission (FTC) is investigating the Paragaon acquisition as part of an anti-trust probe. In a statement to Reuters, Valeant said, “Our acquisition of Paragon Holdings supports our mission to improve consumers’ lives by bringing to market innovative, specialty eye care solutions, and we are cooperating with the FTC on its inquiry.”
Bausch and Lomb has also acquired several specialty laboratories that modify the buttons into prescription contact lenses. Four of the laboratories, including Alden Optics, Art Optical, and Tru-Form Optics, are resisting the acquisitions.
In a move that likely made regulators raise eyebrows, Bausch and Lomb jacked up its button prices for its customers, including more than 30 of the specialty laboratories, according to Jan Svochak, president of the contact lens manufacturers association. The prices increased anywhere from 15 percent to more than 120 percent.
“They were substantial,” said Keith Parker, owner and president of Advanced Vision Technology to Reuters. “Some of them 100 percent, some of them more than 100 percent.” It also eliminated volume discounts.
Some labs have responded by jumping to other button suppliers, including Contamac.
This is not the first time recently that regulators have taken a look at Valeant’s business practices. On Oct. 21, the company’s stock plunged and trading was temporarily halted after Citron Research published a negative research note comparing the company to Enron and accused it of “channel stuffing.” Channel stuffing, in that case, refers to using specialty mail-order pharmacies that Valeant controls, and then using it to prop up sales of high-priced drugs, forcing patients and insurance companies from shifting to generics.
This complicated issue was related to R&O Pharmacy, a specialty pharmacy that appeared to have a questionable relationship with Philidor Rx Services. Philidor seems to have a single client, Valeant. Citron accused Valeant that Philidor and R&O Pharmacy were the same company, although it appears more likely that Philidor is basically a part of Valeant, which creates an indirect connection to R&O.
In late September, Mike Pearson, Valeant’s chief executive officer, sent a letter to employees explaining the company’s strategy in light of a recent stock drop. Valeant, in April, acquired two cardiac drugs, Nitropress and Isupress, when it bought Salix Pharmaceuticals. It then increased the prices of those drugs by 212 percent and 525 percent, respectively. This was before the public furor over Turing Pharmaceuticals AG, which acquired the rights to the parasite drug Daraprim, and increased the price by 5,000 percent.
It’s possible that any large international company is always in the crosshairs of lawsuits and regulatory investigations, but Valeant’s have been particularly high profile. In August 2014, Valeant, along with Bill Ackman’s New York hedge fund, Pershing Square Capital Management, were the target of a U.S. Security and Exchange Commission (SEC) investigation for insider trading. In March 2014, Pershing Square bought up about 10 percent of Allergan ’s stock. A month later, Valeant and Pershing Square announced a joint bid for Allergan. The stock jumped 15 percent, which provided Pershing with $1 billion in gains.
Valeant has been battered recently. Shares traded on March 12, 2015 for $192.62 and rose to $262.56 on Aug. 5, 2015. Shares plunged to $109.54 on Oct. 27 and are currently trading for $120.05.