Deutsche Bank provided color on Valeant Pharmaceuticals VRX after the company announced it will acquire Sanitas, a Lithuanian-based generic drugs manufacturer.
In a research report published today, Deutsche Bank states, "Very early this morning, Valeant has agreed to acquire Lithuanian-based AB
Sanitas, a publicly-traded specialty pharmaceuticals company with a broad
branded generic product portfolio (390 products) in nine Central and Eastern
European countries, for approximately Euro 314M (US$450M) in addition to
the assumption of Euro 50M in debt. According to Valeant, the majority
shareholders have agreed to sell Valeant 87.2% of Sanitas' outstanding
shares, with at least 82.6% to be delivered at closing, which is expected to
take place in 3Q11."
Deutsche Bank also believes the acquisition will strengthen Valeant's position in Europe. The report states, "In acquiring Sanitas, Valeant's European branded generic business could
expand by an additional 25% next year (we currently project 2012 European
revenue of $585M), further solidifying its position as a leading pharmaceutical company in Central and Eastern Europe. Given in-house development
capabilities in dermatology, ophthalmology, and hospital injectables, Sanitas has established a solid track record of profitability that could bolster
Valeant's European growth prospects in the coming years. Also of importance, with 80% of Sanitas' current portfolio comprised of non-reimbursed
products, there is limited exposure to any potential government pricing
pressures."
The transaction, which is expected to go through in Q4 2011, will have an immediate impact on Valeant's earnings, raising its 2012 earnings per share by as much as $0.15. The report states, "Projected to be completed in 4Q11, this transaction is expected to be immediately accretive. While we have not yet spoken to the company, based
on Sanitas' 1Q11 financials (pre-tax income of Euro 5.9M), we estimate that
this transaction could contribute EPS of approximately $0.12-0.15 in 2012,
assuming modest synergies and a 10% corporate tax rate. This would rep-
resent annualized accretion of approximately 4-5%."
At the moment, Deutsche Bank has a Buy rating and $55 price target on Valeant. On Monday, Valeant lost 2.58% to close the day at $48.24.
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