Valeant Pharmaceuticals International, Inc.
) recently announced that it has entered into an agreement to
acquire certain branded generic assets from Austrian pharmaceutical
company, Gerot Lannach. As per the terms of the agreement, Valeant
will pay less than $165 million for the assets. Additionally, the
company will be obligated to make milestone payments of up to $20
million, based upon achievement of performance targets. The deal is
expected to close shortly subject to certain regulatory
The acquired assets generated net revenues of $55 million in
2011, up more than 20% from the year-ago period. Revenues were
primarily generated in Russia (approximately 90%) and Commonwealth
of Independent States (
) including Kazakhstan and Uzbekistan. Acetylsalicylic acid, a low
dose aspirin, is Gerot Lannach's key revenue grosser.
The companies have also entered into an exclusive 10-year supply
agreement for the acquired assets. While Gerot Lannach will seek
rights to Valeant products not marketed in its territories, Valeant
will look to introduce Gerot Lannach products into Valeant
territories such as South East Asia and Latin America.
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.
According to Valeant, the Russian market is expected to grow
approximately 15% annually. We expect the acquisition to be
accretive for the company and are pleased with the company's
efforts to expand in Central and Eastern European markets.
We currently have a Neutral long-term recommendation on Valeant.
The stock carries a Zacks #3 Rank (Hold rating) in the short
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