Debt-saddled Canadian drugmaker Valeant Pharmaceuticals (NYSE/TSX: VRX) has agreed to sell three of its skincare brands to French cosmetics company L’Oreal (EPA: OR) for $1.3 billion in cash. In a separate deal worth $819.9 million, Valeant earlier this week agreed to sell its urological oncology unit Dendreon Pharmaceuticals to Chinese conglomerate Sanpower Group. Following the divestments, the embattled company saw its shares pop, closing Tuesday up 6.8% at $16.40.
Selling CeraVe, AcneFree and AMBI to L’Oreal has helped Valeant realize a 7.7x multiple on their combined annual revenues—approximately $168 million. For L’Oreal’s part, the purchase represents a play for the growing market for medicated skincare products housed under the company’s active cosmetics division, which also includes the brands La Roche-Posay, Vichy and SkinCeuticals.
With the acquisition of Dendreon, Sanpower gets Provenge, an autologous cellular immunotherapy for treating prostate cancer that represents the unit’s first and only product ready for market. Valeant picked up Dendreon out of bankruptcy for $445 million in 2015, with its sale representing a 1.8x return. That deal is expected to close by the end of June, with the L’Oreal transaction set to close sometime this quarter.
Sell-by date: 2020
Valeant will use the proceeds from both sales to permanently repay its hefty term-loan debt of $30 billion under its senior credit facility, roughly half of which will come due in 2020 and should prompt further divestitures in the meantime. Its over-the-counter drugs include ReNu Multiplus and Boston contact lens products, among others. But its subsidiaries, including Bausch + Lomb (purchased for $8.7 billion in 2013), would command the highest prices. Valeant has completed 39 M&A deals since picking up Russian firm Marbiopharm in 1997, according to the PitchBook Platform.
Valeant’s market value has tanked 94% to $5.3 billion from its height in 2015. As summarized by Bloomberg, the company curtailed its financial forecast three times last year and faced investigation from US congressional panels, the Federal Trade Commission, and the Securities and Exchange Commission. Some of the issues stemmed from allegations it had operated in secret with the mail-order pharmacy Philidor Rx Services to increase the sale of its products, defrauding insurers and failing to inform investors of the relationship until October 2015.
Article by Adam Putz, PitchBook