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Valeant To Buy Bausch & Lomb

Specialty Pharma: $8.7 billion eye care acquisition continues consolidation trend

by Marc S. Reisch
May 31, 2013 | A version of this story appeared in Volume 91, Issue 22

Credit: Shutterstock
Bausch & Lomb deal will take Canada’s Valeant into eye care.
A close up shot of someone administering an eyedrop.
Credit: Shutterstock
Bausch & Lomb deal will take Canada’s Valeant into eye care.

Canada’s Valeant Pharmaceuticals has reached a definitive agreement to acquire eye care specialist Bausch & Lomb in an $8.7 billion deal that adds to the consolidation among specialty pharmaceutical makers.

The deal calls for Valeant to pay $4.5 billion to investors led by Warburg Pincus, which took the eye health firm private in 2007. Another $4.2 billion will go to paying Bausch & Lomb debt.

In return, Valeant gets an eye health company that competes with firms such as Novartis, Allergan, and Johnson & Johnson in a $36 billion-per-year market.

Bausch & Lomb, which is expected to post $3.5 billion in sales this year, makes over-the-counter and prescription eye care pharmaceuticals, contact lenses and solutions, and surgical equipment.

The eye health market is in many ways similar to dermatology, another specialty pharma business, Valeant CEO J. Michael Pearson told investors in a May 28 conference call. Valeant purchased Arizona-based Medicis Pharmaceuticals, a maker of prescription skin products, last year for $2.6 billion.

The skin and eye health markets are both growing, and both “have a low exposure to reimbursement pressures and have a large cash pay component,” Pearson said in explaining the rationale behind the transactions.

When the Bausch & Lomb purchase is completed in the third quarter, Valeant expects to have annual sales exceeding $8 billion, of which one-third will come from eye health, one-third from skin care, and the remainder from neurology and consumer health businesses. The acquisitive firm recently attempted to buy Actavis but was rebuffed. Actavis went on to buy specialty drugmaker Warner Chilcott for $8.5 billion.

Other recent specialty pharma deals include Mylan’s purchase of injectable drug maker Agila Specialties for $1.6 billion and Novartis’ $1.5 billion buy of Fougera Pharmaceuticals, a specialty dermatology firm.

So far in 2013, specialty pharmaceutical firms have been “punching above their weight,” says Andrew Forman, an analyst at consulting firm Ernst & Young’s life sciences center. They have been responsible for 90% of big drug deals this year; in 2009 they were responsible for 10% of those deals.



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