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VRX and Gladerma Ink Revised Deal

Zacks Equity Research

Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has inked a revised North American aesthetics deal with Galderma S.A.

According to the terms of the modified deal, Galderma will continue to be responsible for supplying dermal filler products Restylane and Perlane to Valeant Pharma. Gladerma will supply these drugs to Valeant Pharma under the same terms and conditions under which the former currently supplies the drugs to Medicis Pharmaceutical Corporation (MRX). 

We note that in September 2012, Valeant Pharma announced that it has inked a deal with Medicis Pharma, a specialty pharmaceutical company, to acquire the latter for $44.00 per share in cash. The deal is worth approximately $2.6 billion. The transaction is expected to be completed on December 11, 2012.

Medicis Pharma is engaged in the development and marketing of products for the treatment of dermatological and aesthetic conditions in the US. Key products include Solodyn, Perlane, Restylane, Ziana, Dysport and Zyclara.

Per the modified deal with Gladerma, Valeant will make an upfront payment apart from a royalty to the former on sales of Sculptra, an injectable anti-aging facial therapy. Moreover, Valeant will get the North American rights of Emervel, an innovative next generation family of hyaluronic acid dermal fillers.  The terms of the revised agreement are subject to the successful closure of Valeant Pharma’s impending takeover of Medicis Pharma. Moreover, Valeant Pharma also settled a lawsuit with Gladerma pertaining to its impending purchase of Medicis Pharma.

We remind investors that in November 2012, Q-Med AB, a division of Gladerma, filed a lawsuit against Medicis alleging that the latter breached the agreement between the two companies. Q-Med granted Medicis exclusive US and Canadian rights to market certain dermal filler products, including Restylane and Perlane. Q-Med sought a preliminary injunction to prevent the Medicis–Valeant deal. However, the lawsuit was dismissed earlier in the month.

Our Recommendation

We currently have an Outperform recommendation on Valeant Pharma. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

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