Just over a year ago, word was that Valeant Pharmaceuticals ($VRX) wanted to buy Medicis Pharmaceuticals. The dermatology specialist's CEO, Jonah Shacknai, had just lost his son to an accidental fall, and his girlfriend had died in an apparent suicide. Medicis stock was down. Shacknai admitted to some "introspective thinking." The time for a bargain deal looked right.
Well, apparently the time wasn't really right until now. Valeant has agreed to buy Medicis for $2.6 billion, or $44 per share. That's a 39% premium to Friday's closing price of $31.56. According to Wall Street Journal historical pricing data, in the weeks after Shacknai's tragic losses, the stock traded not much lower than that. So, it appears that Valeant CEO J. Michael Pearson may have made a bargain deal anyway.
That's certainly Pearson's modus operandi. He's been on an acquisition spree since 2008, with around 50 deals to his credit since. The Medicis buy is his biggest since Biovail and Valeant merged two years ago, and it's in line with Valeant's stated mission to build a leading dermatology franchise. Medicis specializes in treatments for acne and other skin problems--and, most prominently, wrinkles.
"Dermatology is clearly our most important business," Pearson told Reuters. "We'll work on growing it ... we are quite excited about the future of the market in the United States."
Medicis sells the acne drug Solodyn, the Botox competitor Dysport, and Restylane, a wrinkle-filler that competes with Allergan's ($AGN) Juvéderm. Because cosmetic uses tend to be out-of-pocket for patients, they're not as vulnerable to government budget-cutting (though they can be vulnerable to a sluggish economy).
"It's a business [Valeant's] CEO has talked about in the past that they've found very attractive with lower government threat to pay and generic competition," Canaccord analyst Neil Maruoka told Bloomberg. Valeant says it expects the deal to add to cash EPS immediately.