Valeant in Talks to Pay $700 to $800 Million for Egyptian Drugmaker Amoun to Expand GI Line

Published: May 20, 2015

Valeant in Talks to Pay $700 to $800 Million for Egyptian Drugmaker Amoun to Expand GI Line
May 20, 2015
By Alex Keown and Riley McDermid, Breaking News Staff

QUEBEC -- Canadian drugmaker Valeant Pharmaceuticals International, Inc. is in early talks to acquire Egyptian-based Amoun Pharmaceuticals to expand its veterinary and human medication portfolio, Bloomberg Business reported this morning.

The deal could place a value of $700 to $800 million on Amoun, according to sources who spoke to Bloomberg on condition of anonymity.

Valeant’s stock was up this morning, trading at a high of $227.86, following Bloomberg’s report. The stock has been a strong performer over the past year, gaining about 68 percent in Toronto and about 103 percent overall, the International Business Times noted.

The Middle East, along with Asia and Latin America are potential territories for business growth, Valeant’s Chief Executive Officer Michael Pearson said during a shareholder’s meeting earlier this week. Valeant reported $2.2 billion in revenue for the first quarter of 2015, an increase of 16 percent over the same period last year. The company said it experienced double-digit growth in those emerging areas.

Valeant, which specializes in eye medications, including glaucoma-treating medication Vesneo, has been one of the central players in the latest pharmaceutical and biotech trend of growth through acquisition. Last year Valeant lost out to Actavis on its bid to acquire Botox-maker Allergan Inc. , however in April the company said the effort still generated $287 million in net profit for Valeant. In April though, Valeant won a bidding war against Endo Pharmaceuticals to acquire Salix Pharmaceuticals, Ltd. , the maker of Xifaxan, a drug used to treat traveler’s diarrhea and liver disease, for approximately $11 billion in cash.

The completion of that deal made the Valeant one of the leading providers of treatments for gastrointestinal disorders. In its first quarter report Valeant said it expected $500 million in “run rate synergies” by the end of the second quarter of this year,

Acquiring Amoun would allow Valeant to expand on its gastrointestinal product pipeline. Amoun manufactures five drugs for various gastrointestinal disorders, including an anti-obesity medication, an antacid and Antodine, an H2 blocker used for acid reflux. Amoun has approximately 30 products in its pipeline.

Investing in biotech firms makes good financial sense. In 2013 and 2014 biotech stocks performed well, yielding a good return on investment. More recently, there has been a spate of large pharmaceutical companies snapping up smaller startups and entities, including Pfizer Inc. ’s $17 billion merger agreements with Illinois-based Hospira, Inc., or Amgen ’s acquisition of Onyx Pharmaceuticals, Inc. for $10 billion in 2013. There has been an estimated $100 billion spent on pharmaceutical mergers and acquisitions since 2014.

Amoun’s owners hired Goldman Sachs Group Inc. as an adviser, Bloomberg News reported.

Shareholders are working with the firm to pursue options including a sale.

If the deal falls apart, undisclosed sources told Bloomberg that Amoun could attempt to take the company public on the London Stock Exchange.

In 2006 Amoun was acquired by a group of international investors, including CVCI Private Equity fund, Capital International Private Equity and Concord International, according to the company website. Despite political turmoil in the region, the Egyptian company said it expects revenue to grow by 21 percent this year.

Despite its growth, Valeant made headlines in mid-April, after its $50.6 million paycheck for Executive Vice President Ari Kellen made him the second-highest freshly hired non-chief executive in the U.S.--second only to Apple ’s new sales chief, Angela Ahrendts.

According to summary compensation table data compiled by Bloomberg and public filings, Kellen got performance-based stock awards of $36.6 million in front-loaded pay, $752,885 in salary, a $5 million cash bonus linked to Valeant’s recent buyout of Bausch & Lomb, $6.5 million in additional restricted share units as part of a stock matching program, and a $1.8 million annual cash bonus.

That puts him in the very top-tier of highest paid corporate honchos anywhere, said the news service, including most biotech executives.

“Kellen’s package is almost five times larger than that of Valeant CEO Michael Pearson, who received $10.3 million,” said Bloomberg.

Kellen has only been with Valeant since January 2014, when he came on board as executive vice president and company group chairman. His purview includes eye health, dermatology, research and development, and Valeant’s Latin American units.

Joe Kager, a managing consultant at POE Group, a compensation consulting firm, told Bloomberg that a pay package that size will certainly raise eyebrows--in any sector.

“If you have a new hire and you had to take them away from another competitor, sometimes you’ll see a substantial grant,” Kager said. “It’s not that atypical if he’s really a shooting star, but it is an awfully large number.”

Will Mylan Buy Teva, As Predator Becomes Prey?
The complicated three-way takeover waltz being conducted between Pittsburgh, Penn.-based Mylan Inc., Israeli company Teva Pharmaceutical Industries Ltd. and Perrigo Company took another weird turn last week, after Mylan said that while it still views Teva’s unsolicited $40.1 billion bid as too low, it might want to acquire Teva itself eventually. Mylan Chairman Robert J. Coury made it clear that if Mylan is able to cement its deal with Perrigo, it might go shopping again—and this time to buy Teva, not be bought. With dealmaking heating up in 2015, we wanted to know your thoughts: Will perennial predator Teva wind up being prey?

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