Valeant Pharmaceuticals International, Inc. has signed an agreement to acquire iNova, a private Australian drug maker in a deal that could be worth as much as $714 million.
Valeant (TSX:VRX) chairman and chief executive Michael Pearson said the deal gives his company the needed scale and reach in Australia as well as new operations in both Southeast Asia and South Africa.
“We were subscale and we either had to get bigger or not stay in Australia,” he said in an interview.
“It gives considerably more scale than we had… We either had to sell it our bulk up a little bit and now we feel we’ve done that.”
Pearson said the company has been active with deals in Europe, Australia, Asia and North America this year.
“Latin America is the most likely area probably you’ll see us on our next move,” he said.
INova sells and distributes a range of prescription and over-the-counter medicines and weight loss products in Australia, New Zealand, Southeast Asia and South Africa.
The transaction Monday is the latest in a wave of acquisitions by Valeant, the Canadian-American company formerly known as Biovail Corp.
Story continues below
Earlier this year, Valeant signed a deal to buy the Ortho Dermatologics division of Janssen Pharmaceuticals Inc. for $345 million and Dermik, a dermatology unit of Sanofi in the U.S. and Canada, for $425 million.
Valeant has also signed a deal to acquire Cold-FX maker Afexa Life Sciences Inc. for about $88 million.
Pearson said the company will use cash on hand and tap the debt markets for the rest to pay for the company’s recent acquisitions.
“We view our equity as our most precious asset,” he said, noting that the company prefers not to use shares to acquire assets.
Valeant is buying iNova from Archer Capital, a private Australian investor, Ironbridge and some minority management shareholders.
Before markets opened, Valeant said it will pay iNova shareholders $625 million (Australian) up front and up to an additional $75 million if certain milestones are reached.
At current exchange rates, that translates to about C$714 million.
INova’s 2011 revenues are expected to be about $200 million, with revenues growing by about 10 per cent per year over the last four years.
The company makes therapeutic weight management drugs such as Duromine and over-the-counter medications for colds and coughs such as Difflam and Duro Tuss.
The transaction is subject to certain closing conditions and post-closing adjustments, and is expected to be immediately accretive.
Valeant, based in Mississauga, Ont., is focused on neurology and dermatology drugs primarily in Canada, the United States, Mexico, Brazil, Central and Eastern Europe and Australia.
In September 2010, Valeant and Biovail Corp. merged to become one company with about 5,000 employees worldwide.
Shares in the company were up 41 cents at $44.16 in Monday trading on the Toronto Stock Exchange.