Can Valeant turn Dendreon's flailing Provenge into a viable cancer competitor?

The deadline to bid for Dendreon ($DNDN) has come and gone, and now that no other qualified bids have come forward, Valeant ($VRX) is walking away victorious.

The Canadian pharma will pick up flailing prostate cancer vaccine Provenge and the Seattle biotech's other assets for $400 million in cash, it said Tuesday. The companies will seek court approval Feb. 20, and they expect to close the deal by the end of the month.

The $400 million price is about 30% higher than Valeant's initial stalking horse bid. In January, Valeant offered $296 million to get the auction going, but it boosted its bid when other buyers stepped in. Kentucky's US Worldmeds and New York investment firm Deerfield Management--a major Dendreon creditor--had placed a rival bid, but they didn't top Valeant's raised offer, Reuters reports.  

Valeant CEO J. Michael Pearson

It's another feather in the cap for Valeant CEO J. Michael Pearson, a serial acquirer whose deals have mainly come in the quickly expanding skincare and eyecare fields. But the way he sees it, the oncology business shares "similar characteristics" with those specialty portfolios, including "strong growth, high durability, strong patient and physician loyalty, and a terrific reimbursement regime," he said in a statement.

Turning Provenge sales around won't be easy--the infused product comes with a sky-high price tag, manufacturing challenges and two hot new oral competitors. Johnson & Johnson's ($JNJ) Zytiga, along with Xtandi from Astellas and Medivation ($MDVN), have entrenched themselves in the prostate cancer market while Dendreon floundered. Plus, Valeant will have to build up an oncology marketing team and salesforce.

One thing seems certain: Cost cuts are on the way. Dendreon has struggled with cost control, and Pearson is notorious for wringing every spare penny from his buyout targets as he folds them in.

But buying assets out of bankruptcy has its financial perks, giving Valeant room to maneuver, Pearson says. "We have not previously found an economic way to enter this market, but with the unique dynamics of this situation, we believe that this transaction will create significant shareholder value," he said in January.

Meanwhile, Valeant may already be eyeing its next target. Reports say it's talking with its advisers about a potential bid for North Carolina's Salix ($SLXP), whose investors are agitating for a sale after an inventory snafu overstated sales and triggered a C-suite shakeup.

- read Valeant's release
- get more from Reuters

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