February 13, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Watch out Valeant Pharmaceuticals International, Inc. , the British are coming! Just a day after news leaked that the Canadian drugmaker has received financing to fund a run at Salix Pharmaceuticals, Ltd. , Reuters is reporting that U.K. pharmaceutical firm Shire Pharmaceuticals is also cobbling together its own bid for Salix.
That could be setting up a potential bidding war for the bowel-drug company, sources familiar with the deliberations told Reuters.
The amount of any possible bid by Salix was not disclosed, said Reuters, which speculated that if it were high enough, Shire might be a good fit for Salix because of its track record buying rare disease related companies, including the $5.2 billion acquisition of NPS Pharmaceuticals, Inc. in January and a $4.2 billion acquisition of ViroPharma Incorporated .
Salix makes irritable bowel syndrome drug Xifaxan but has struggled with inventory issues and financial reporting problems recently.
For its part, Valeant Pharmaceuticals International Inc has received financing to fund its takeover bid for Salix Pharmaceuticals Ltd (SLXP.O) at more than $150 per share, say people familiar with the deal, Bloomberg reported Thursday.
At that bid price, Valeant would be offering Salix a $9.6 billion value, an interesting price point considering that with its net debt, Salix is currently valued at $10.9 billion. That news that pushed shares of Salix up more than 6 percent in afternoon trading on Thursday as investors heralded the news--and added value in the hopes of getting a higher bid.
The news comes amid reports that Valeant is once again going shopping, despite pressure from shareholders and Wall Street analysts to rein in its free-spending buying spree. Since 2008, Valeant has acquired more than 100 smaller companies, a pace Chief Financial Officer Howard Schiller told stakeholders earlier this year that will slow, but will still be active.
Valeant was rumored last week to be mulling over a bid for Raleigh, N.C.-based Salix Pharmaceuticals, Ltd. (SLXP), though many market watchers worry the Valeant will pay too much for Salix, which has a market value of around $9 billion. Shibani Malhotra, an analyst with Sterne Agee Group, has estimated that the shares could shoot up as high as $170 each after a takeover, a massive premium to where it now sits at $152.
“We believe the resolution of the accounting-related overhang should ease investor concerns,” said Malhotra in his note, “as reliable financials will be available near-term for investors as well as potential acquirers.”
Schiller said shareholders should expect “small and medium sized transactions” in 2015, he told the audience of J.P. Morgan Healthcare Conference which began Monday in San Francisco and is the oldest and largest conference of its type. It includes 300 of the largest biotech, healthcare and biopharma companies presenting their top-line data and estimates to 4,000 of eager bankers, analysts, institutional investors, hedge funds and journalists.
Valeant has made 60 acquisitions in six years, including its most recent deal to buy eye care company Bausch & Lomb for $8.7 billion.
Valeant has previously said it aims to be one top five pharma companies by the end of 2016, which means it would need to have a market cap of $150 billion, a difficult task as its debt continues to balloon . Right now, Valeant has $17 billion in debt on its books from $4.9 billion in 2012, a huge leap from $2.6 billion in 2008, when CEO Michael Pearson joined the company.
The company told analysts during a fourth quarter call last year that they hope to keep the deal making up.
“We can’t predict the path that will get us to the $150 billion, per se. But we find it’s very helpful to set a structure of aspiration,” an executive said at the time. “It’s something that we’ve done every year, and it gives our investors a sense of where we’re trying to go. And unless you aim high, you don’t achieve high.”
BioSpace Temperature Poll
Who Do You Think Will Be Sanofi’s New CEO? French drugmaker Sanofi said Thursday that it will name a new chief executive in mere weeks, as it attempted to put to rest rumors that the company could not find any executives willing to take the reins after it unceremoniously ousted its previous CEO last fall. Who do you think will soon be crowned king? BioSpace wants your opinion!
