Valeant's debt-fueled castoffs continue with half-priced Obagi sale

Valeant
Valeant's Obagi divestment follows sales of Dendreon and iNova Pharmaceuticals.

It’s been more than a year since analysts first said Valeant could sell off its Obagi Medical Products business to raise cash, but the Canadian drugmaker has finally found a taker.

An investment fund has agreed to fork over $190 million for the dermatology business, which Valeant grabbed in 2013. The drugmaker will use that money to pay down the M&A-fueled debt mountain that's worried investors and beaten down shares in the last several months. 

“The sale of Obagi marks additional progress in our efforts to streamline our operations and reduce debt,” Valeant CEO Joseph Papa said in a statement announcing the sale to Haitong International Zhonghua Finance Acquisition Fund I.

Longtime Valeant critic David Maris, however, was quick to point out that Valeant is selling Obagi for half the sum it originally spent on the buy; the $190 million sale price falls 56.5% below the $437 million Valeant handed over to acquire it, he wrote in a Monday note to clients.

And while Valeant “continues to make progress toward its asset sales and total debt reduction targets,” the way Maris sees it, its efforts so far haven’t been enough.

RELATED: Troubled Valeant unloads Dendreon, skin care brands for $2.1B in turnaround cash

For all of Papa’s talk of asset sales, Valeant has only pulled off a few big ones. Late 2016 talks with Takeda over a potential $10 billion sale of its gastrointestinal unit Salix fell through, and a rumored divestment of eyecare giant Bausch & Lomb hasn't yet materialized. Before the Obagi announcement, in terms of major moves, the company had managed just a $819.9 million sale of cancer vaccine maker Dendreon, a $1.3 billion sale of some skincare brands, and a $930 million sale of iNova Pharmaceuticals.

“In our opinion, leverage remains high and we do not believe that recent deals ... have had a significant deleveraging impact,” Maris wrote.

Valeant hasn’t been relying on castoffs to pay down its debt, though. Last week, it said it would redeem $500 million in senior notes, bringing its debt reduction tally to $4.8 billion since the end of 2016’s Q1.

Of course, debt is far from Valeant's only problem. The company has suffered under struggling sales, a slew of investigations and price-hike pushback in addition to the debt-default worries.