UPDATED: Mylan rains on Valeant parade with Zovirax generic

The way Valeant Pharmaceuticals ($VRX) CEO J. Michael Pearson keeps flashing around cash and making deals, you would think nothing at all could dampen the outlook for the rapidly expanding drug operation. It turns out that is not entirely so. Like its peers, it can be undermined by a well-targeted generic. 

And that is what Valeant expects to happen. It let the market know that a copycat of its genital herpes ointment, Zovirax, could trim from 30 to 40 cents off this year's earnings per share, Reuters reports. The estimate came after the FDA this week approved an application by Mylan ($MYL) to manufacture the first generic of Zovirax.

Pearson said, "While the timing of a generic approval was always uncertain, this was not unforeseen and we were prepared for its eventuality." Maybe so, but Reuters points out that Valeant did not account for this in January when it forecast earnings per share this year of between $5.45 and $5.75. Valeant was prepared enough, though, that today it announced it has a deal for Actavis ($ACT) to begin making an authorized generic of Zovirax. 

Actually, the Mylan drug is not the only bump Valeant has hit on its road to ever-greater earnings. After a string of successful deals, it has found itself in a bidding war for dermatology specialist Obagi Medical. Germany's Merz Pharma this week made a $22 a share, $385 million offer for Obagi. That is an 11% premium over Valeant's offer of $19.75 a share. Merz said it had been in negotiations for Obagi when Valeant got in ahead of it. 

Pearson might counter, but he might also move on. It is not as if the company doesn't have a big play in dermatology already. Last year it nabbed skin care specialist Medicis for $2.6 billion.

- here's the Reuters story
- Valeant press release

Editor's Note: The story was updated to include Valeant's deal for Actavis to make an authorized generic of Zovirax.