There has been a lot of news that was being exchanged since the preliminary news release on Salix Pharmaceutical’s (SLXP, Financial) anticipated acquisition, just a month back. At that point of time, there were several bidders with Endo Pharmaceuticals (ENDP, Financial) and Valeant Pharmaceuticals (VRX, Financial) being the highest bidders for the acquisition deal. Analysts worldwide were curious to find out who ultimately would bag the deal for Salix. And now the answer is finally out –Â it’s none other than Valeant Pharmaceuticals which has placed the highest bid for winning the Salix deal. Let’s dig in deeper to understand how Valeant Pharmaceuticals stands to gain from this recent acquisition, but before that let’s share some of the major highlights of the recently struck deal.
The deal highlights
Last month Valeant Pharmaceuticals had given a bid of $158 per share amounting to a $10 billion bid, after which within a span of two weeks its rival Endo Pharmaceuticals stepped in to raise the bid price to $172.56 a share in cash and stock combined. In the strategy to win over Salix Pharmaceuticals by any means, recently Valeant’s management hiked the bid to $173 per share forcing counter-rival Endo Pharmaceuticals to drop its offer. In fact, the final bid offered by Valeant to acquire the gastrointestinal drugmaker Salix was almost $15 more than its original bid price placed in the past month.
This deal holds a lot of relevance for Valeant’s management and this $11.1 billion deal for acquiring Salix would be one of the biggest deals in the company’s history. Since 2008, there are about 100 transactions that have been completed by the victorious bidder under the leadership of CEO Michael Pearson. Valeant has grown quickly in recent years after such acquisition of companies having proven drugs, which aided in reducing its developmental costs rather than depending on risky research on early stage products.
Benefitting Valeant in the long run
The acquirer stands to benefit in the long term after acquiring Salix Pharmaceuticals which has several attractive drugs in the product pipeline. The top-selling drug of Salix, Xifaxan, that is used for treatment of irritable bowel syndrome, is forecasted to generate sales ranging between $1.25 billion- $1.35 billion for 2015 by the company’s management. Other top-selling drugs such as Uceris and Apriso will also benefit Valeant’s sales growth rate in the long run.
Since Salix holds a backlog of wholesale inventory of drugs whose demand is high in the gastro-intestinal drugs market, purchasing such a company would improve Valeant’s top line in the upcoming years. Deal-making has been the heart of Valeant’s long term strategy and striking this deal would mean acquiring Salix’s successful product range that would aid in building Valeant’s revenue block in the forthcoming quarters.
Last word
With the Salix deal in the kitty, Valeant is on a sales growth trajectory that will be reflected in the upcoming quarters after the acquisition enters the completion phase. Hence, investors should wait and watch how this deal adds the silver lining to Valeant’s future endeavors.
