Valeant Pharmaceuticals Downplays Strategy Shift News

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Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) may not be abandoning its strategy of aggressively pursuing acquisitions after all. One analyst thinks this morning’s headlines about the drug maker dropping the growth by acquisition strategy have been taken out of context.

Valeant shifting strategy?

Reuters reported this morning that Valeant will halt its growth through acquisitions strategy for now. The media outlet cites sources familiar with the drug maker’s plans. According to those sources, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s goal is to cut down its debt and raise its stock price. They also said Valeant would return to the strategy later after it strengthens its position.

The company has made 40 acquisitions in the last six years, sinking $19 billion into that strategy. Last month Valeant’s most recent attempted conquest, Allergan, Inc. (NYSE:AGN), got away by instead striking a deal with Actavis plc (NYSE:ACT).

According to Reuters, Valeant may follow its new strategy for the next two or three quarters.


News taken out of context?

Guggenheim analyst Louise Chen said today she thinks the headlines about Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s shift in strategy have been taken out of context. She said after speaking with company management, she thinks mergers and acquisitions will keep being “an important growth driver” for Valeant.

She added that it’s the same message management gave on Nov. 21 during a group meeting with management and investors. According to Chen, Valeant remains “interested in small and large deals” and that the company “would look at verticals where it is already established but does not rule out expanding into new verticals.” Additionally, she said expanding geographically, especially in Asia, also looks attractive to Valeant management.

Chen continues to rate Valeant Pharmaceuticals as a Buy with a $178 per share price target. She sees any weakness in the drug maker’s shares as a result of Reuters’ headline as presenting a buying opportunity for interested investors.

Valeant’s acquisition strategy dead?

Last week a law professor said Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)’s growth by acquisition strategy is essentially dead. In a post on the Harvard University Law School Blog, attorney Philip Richter of Fried Frank, Harris, Shriver & Jacobson LLP said the strategy is essentially illegal or at least highly frowned upon, even though the Securities and Exchange Commission has never issued an official ruling on the topic.


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