Valeant Expands Business in Russia - Analyst Blog

Zacks Investment Research
Posted: Mar 28, 2012 8:45 AM
Valeant Expands Business in Russia - Analyst Blog

Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has entered into an agreement to acquire Russian specialty pharmaceutical company, Natur Produkt International, JSC.

As per the terms of the agreement, Valeant will pay approximately $180 million for the acquisition. Additionally, the company might be obligated to pay milestone payments of $5 million. The deal is expected to close by mid 2012 subject to certain regulatory conditions.

Natur Produkt reported revenues of $65 million in 2011 with double-digit sales growth anticipated in 2012. It has a leading over-the-counter (OTC) franchise, which boasts of products like AntiGrippin, Anti Angin, Sage and Eucaplyptus MA.

The company has made a number of acquisitions in the past few quarters to expand its presence in Russia. According to Valeant, the Russian market is expected to grow approximately 15% annually.

A few weeks ago, Valeant stated that it was acquiring certain branded generic assets from an Austrian pharmaceutical company, Gerot Lannach. The acquired assets generated net revenues of $55 million in 2011, an increase of more than 20% from the year-ago period. Revenues were primarily generated in Russia (approximately 90%) and Commonwealth of Independent States (CIS) including Kazakhstan and Uzbekistan.

Last year, in August, Valeant had acquired a Lithuania-based specialty pharmaceuticals company, AB Sanitas, for approximately €314 million in cash. Approximately 390 products, marketed primarily in Poland, Russia and Lithuania, were added to Valeant’s portfolio post acquisition.

Valeant expects pro forma revenues, including contributions from the Natur Produkt and Gerot Lannach acquisitions, in Russia to be approximately $175 million by 2012. We expect the acquisitions to be accretive and are pleased with the company’s efforts to expand in Central and Eastern European markets.

Our Recommendation

We currently have a Neutral long-term recommendation on Valeant. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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