Embattled Valeant has promised its investors $8 billion in asset sales—but as the company’s latest deal struggles continue to demonstrate, getting there may not be so easy.
The bids rolling in for Valeant’s Australian iNova subsidiary aren’t quite up to expectations, The Australian Business Review reports (sub. req.), with a private equity consortium comprising The Carlyle Group and Pacific Equity Partners, as well as fellow drugmakers Mundipharma and Stada, each launching offers of around $900 million.
Now, the Review says, Valeant is weighing whether to hang onto iNova—which sells products ranging from weight-loss drug Duromine to asthma treatment Qvar—after the Goldman Sachs-run sales process.
The way Wells Fargo analyst David Maris sees it, “this is another disappointment” on the way to the pledged $8 billion asset sales mark. So far, Valeant has mustered only $2.1 billion in its quest fir cash to pay down debt racked up by former CEO and M&A enthusiast J. Michael Pearson. That $2.1 billion haul came from January agreements to unload its equity interest in cancer vaccine maker Dendreon, as well as skincare brands CeraVe, AcneFree and AMBI.
RELATED: Troubled Valeant unloads Dendreon, skin care brands for $2.1B in turnaround cash
Late last year, Valeant also reportedly tried to sell its underperforming GI unit, Salix, to Japan’s Takeda, but talks on a $10 billion deal ultimately fell through over price.
To Maris, the iNova news comes as no surprise, considering Valeant’s recent debt refinancing. The move was "a sign that near-term asset sales of significant value are not at hand, given in our experience, we would expect a company that had potential near-term asset sales to complete those sales and pay down debt, rather than refinancing first,” he figures.
Some investors are tired of waiting for the seemingly elusive turnaround. The company’s stock, battered by channel-stuffing allegations, political pricing pushback and debt default worries, is still trading below $10, which Maris dubbed a “a critical psychological price point.”
Last month, activist investor and hedge fund manager Bill Ackman—a former takeover partner and Valeant board member—finally bailed on his investment, telling his investors that “there is still a lot of work to be done” to get the Canadian pharma back on track.
Rumored iNova buyer Stada, meanwhile, is in the middle of its own M&A melee. The potentially-for-sale German generics player recently rolled out a cost-cutting initiative and new financial forecasts aimed at generating higher bids.