A Deeper Look Into Valeant's Assets As It Searches For Salix Buyer

Valeant is plagued with debt, causing some concern among shareholders so any cash infusion would certainly ease concern and be a net positive for the troubled company. On the other hand, investors have reason to be concerned that Valeant is divesting a business unit which is vital to its future.

Salix is a leader in the gastrointestinal market, which is one of a handful units Valeant operates.

Based on Valeant's second-quarter earnings results, the company's Gastrointestinal unit is the second largest segment based on revenue, which totaled $344.1 million. The largest business segment, neuro & other/generics collected $467.4 million in revenue in the quarter.

Here is a rundown of the remaining segments, based on their U.S. revenue.

• Dermatology: $208.4 million.
• Consumer: $173.1 million.
• Ophthalmology Rx: $101.7 million.
• Urology/Oncology: $77.5 million.
• Surgical: $60.5 million.
• Contact Lenses: $55.3 million.
• Dental: $44.9 million.

What Could These Be Worth?

Valeant is negotiating from a position of weakness and not strength, so any sale would come at a depressed multiple, at least according to CIBC World Markets' analyst Prakash Gowd, who commented on any asset sale back in April.

Gowd suggested Valeant could receive a multiple of 6x EBITDA on an asset sale, which would value Xifaxan, Valeant's top-selling product for the treatment of irritable-bowel disease at just $3 billion.

The opportunity to collect a quick cash infusion to pay down some debt does not justify the lost earnings and cash flow, the analyst suggested.

Moving on, selling the neuro & other/generics segment is "not a great option since the resulting cash is less, and the de-leveraging opportunity even less impactful."