Valeant forays into oncology with stalking-horse bid for Dendreon's Provenge

Valeant ($VRX) has finally made a significant M&A move after its failed pursuit of Allergan ($AGN), and bankrupt Dendreon ($DNDN) has finally found a way to unload cancer vaccine Provenge. And they're one and the same.

The Canadian drugmaker said late Thursday it had reached a deal to buy the prostate cancer treatment and other assets from Dendreon for $296 million in cash, entering into a stalking-horse agreement that a bankruptcy court must now approve. While the deal is subject to higher bids until Feb. 10, Valeant will pick up an undisclosed breakup fee and be reimbursed expenses if it doesn't win the auction.

The agreement follows the Seattle biotech's Chapter 11 filing, protection it sought back in November as it faced $620 million in convertible debt due in 2016. Provenge hardships helped get it there; while analysts expected big things for the first cancer vaccine to win FDA approval, multiple hurdles--including a whopper $93,000 price tag and strong launches from new, more convenient rivals Xtandi from Astellas and Medivation ($MDVN), and Zytiga from Johnson & Johnson ($JNJ)--took their toll.

Valeant CEO J. Michael Pearson

Now, those issues could be Valeant's to deal with. It's the first buy for CEO and serial acquirer J. Michael Pearson since Actavis ($ACT) spoiled the company's hostile run at Allergan with a $66 billion swoop-in of its own. Since then, the Quebec-based pharma has said it wouldn't be swearing off dealmaking, exactly, but it would be putting more resources toward its own new product launches--and showing the pharma world it can stand on its own two feet.

And while oncology is a new area for Pearson--who has been snapping up companies in the fast-growing skincare and eyecare fields like there's no tomorrow--it's one he thinks fits well with the rest of Valeant's lineup.

"We believe that oncology has similar characteristics to our current therapeutic portfolios, such as strong growth, high durability, strong patient and physician loyalty, and a terrific reimbursement regime," he said in a statement. "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."

- read Valeant's release

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