Valeant to Buy Gerot Lannach Assets - Analyst Blog

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Valeant Pharmaceuticals International, Inc. ( VRX ) 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 conditions.

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 ( CIS ) 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.

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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