Valeant takes huge loss on previous deal to pay down debts
pharmafile | July 18, 2017 | News story | Manufacturing and Production, Sales and Marketing | Obagi Medical Products, Valeant, biotech, drugs, pharma, pharmaceutical
It is an odd time for Valeant, where selling a part of its business for half of what it paid, only four years ago, represents a success. Valeant announced that it had sold Obagi Medical Products for $190 million, in cash, after having bought the dermatology business for $437 million in 2013.
This is how bad things have become for Valeant that a deal representing a loss has been spun as signs of progress for the company.
“The sale of Obagi marks additional progress in our efforts to streamline our operations and reduce debt,” Joseph Papa, Chairman and CEO, Valeant. “As we continue to transform Valeant, we will remain focused on the core businesses that will drive high value for our shareholders.”
As mentioned by Papa, Valeant is aiming to pay down its debts – with an aim of securing $5 billion by February 2018. Obagi joins the other off-loaded items as parts of Valeant’s garage sale, which includes its iNova divison ($930 million), Dendreon ($820 million) and three parts of its cosmetics business (CeraVe, AcneFree and Ambi for $1.3 billion).
The sales are edging Valeant to a position closer to its plan to paying down its targeted figure but there is still the larger question of how it will manage the rest of its debt mountain. Overall debt stands at $29 billion, as of 31 March.
It had hoped to wipe a significant chunk of this figure with the sale of Salix, its gastrointestinal unit, to Takeda. The deal was thought to be relatively close, with the key issue behind the deal falling through being the price. The company bought Salix for $11.1 billion back in 2015 and decided, rather than take a potential loss on the company, to keep and invest in its division.
The company is struggling to overcome the acquisition-spree that former CEO J. Michael Pearson embarked on, alongside an aggressive price hiking strategy that won the company no favours with the public, before an accounting scandal drove the share price of the company down. The company is struggling to recover from this combination and it has focused on unburdening itself from debt worries as a priority.
Ben Hargreaves
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