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Valeant Ups Offer for Obagi

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Valeant Pharmaceuticals (VRX) recently announced that the company has increased its offer price to acquire Obagi Medical Products, Inc. (OMPI).

As per the new agreement, Valeant increased its offer price to $24.00 from the original offer price of $19.75 per share in cash. The acquisition was announced on Mar 20, 2013.

We note that the increased offer price now represents a 56% premium to Obagi's closing share price on Mar 19, 2013 compared to 28% premium offered earlier.

The amended agreement has been unanimously approved by Obagi’s board.

We remind investors that Valeant Pharma decided to increase the offer price after German company Merz Pharma Group offered to acquire Obagi for $22 per share in cash. 

Obagi develops markets and sells products, which prevent or improve the most common and visible skin disorders. With leading dermatology brands such as Obagi Nu-Derm, Condition & Enhance, Obagi-C Rx, ELASTIDerm and CLENZIDerm in its portfolio, Obagi has grown its revenues from $35.6 million in 2001 to $120.7 million in 2012.

Valeant Pharmaceuticals also has a strong presence in the dermatology field. Hence, Valeant is keen to acquire Obagi to further augment its product portfolio.

We note that acquisition activity has been quite strong in recent times in the dermatological segment. In Dec 2012, Valeant Pharma acquired the entire outstanding common stock of Medicis Pharmaceutical Corporation for approximately $2.6 billion.

The erstwhile Medicis Pharma focused on the development and marketing of products for the treatment of dermatological and aesthetic conditions in the US.

On the other hand, Allergan, Inc. (AGN) acquired privately-held SkinMedica, Inc. in Dec 2012 with a focus on the latter’s topical aesthetics skin care business. 

Valeant Pharmaceuticals currently carries a Zacks Rank #3 (Hold). Right now, Furiex Pharmaceuticals Ltd. (FURX) looks better positioned with a Zacks Rank #2 (Buy).

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