Valeant Pharmaceuticals International (VRX) recently entered into an agreement to acquire all the US and Canadian rights to GlaxoSmithKline plc’s (GSK) herpes viruses treatment, Zovirax, for $300 million. The transaction is subject to customary closing conditions.

For 2010, Glaxo recorded sales of $236 million from the drug.

Prior to this agreement, Glaxo used to supply Zovirax to Biovail Laboratories (a subsidiary of Valeant) for marketing and distribution solely in the US.

Apart from Zovirax, Valeant and Glaxo are also developing ezogabine/retigabine (for the treatment of epilepsy) under a worldwide license and collaboration agreement. Last month, the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended the approval of the candidate. The drug will be marketed under the brand name Trobalt in the European Union (EU), once approved.

However, the US Food and Drug Administration (FDA) issued a complete response letter (CRL) in December last year, for the new drug application (NDA) of ezogabine. The CRL was for non-clinical reasons and Valeant and Glaxo plan to file a response to the FDA in 2011.

We note that Valeant has been pursuing deals and acquisitions to grow revenues in order to compensate for the loss of revenues resulting from the genericization of neurology product Diastat and HIV drug ribavirin.

In addition to acquiring Canadian company Biovail Corp. in 2010, Valeant recently entered into an agreement for the acquisition of Switzerland based PharmaSwiss S.A. for €350 million. The company will also have to pay up to €30 million to a few of PharmaSwiss’ shareholders upon achievement of certain milestones.

The transaction, which is expected to be immediately accretive, is scheduled to close in the first or second quarter of 2011, subject to customary closing conditions.

We note that PharmaSwiss’ acquisition should aid in improving the company’s foothold in the EU with PharmaSwiss operating in 19 countries throughout Central and Eastern Europe, including Poland, Hungary, the Czech Republic and Serbia.

We currently have a Neutral recommendation on Valeant.

 
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