Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has entered into an agreement with privately-held equity firm Water Street Healthcare Partners to acquire a US-based specialty oral health company, OraPharma.

As per the terms of the agreement, Valeant will pay approximately $312 million. Additionally, the company might be obligated to pay milestone payments of $114 million. The deal is expected to close by the end of this month subject to certain regulatory conditions.

OraPharma’s portfolio boasts of Arestin (minocycline hydrochloride) indicated as an add-on therapy for scaling and root planing (SRP) procedures for the reduction of pocket depth in patients with adult periodontitis. Arestin can also be used as an adjunct to a periodontal maintenance program, which includes good oral hygiene and SRP.

OraPharma reported revenues of approximately $95 million, demonstrating a high single-digit growth rate from the year-ago figure, for the 12 months ended March 2012. In the US dental industry, OraPharma currently has the largest specialized pharmaceutical sales force. We expect the deal to be accretive for Valeant Pharma.

We note that Valeant Pharma is on an acquisition spree to expand its business. Last month, the company announced that it has entered into agreements to acquire certain assets from both University Medical Pharmaceuticals and Swiss Herbal Remedies Limited.

In April 2012, Valeant Pharma had purchased US-based, privately-owned specialty pharmaceutical company, Pedinol Pharmacal, Inc. and certain branded generic assets from Mexican pharmaceutical company, Atlantis Pharma.

In March 2012, Valeant Pharma inked a deal to purchase Russian specialty pharmaceutical company Natur Produkt. During the same month, Valeant Pharma signed a couple more deals. The company inked a deal to acquire certain branded generic assets from an Austrian pharmaceutical company, Gerot Lannach. Furthermore, Valeant Pharma bought a 19.9% stake in a Brazilian biotech company, Pele Nova Biotecnologia S.A.

We remind investors that in 2012, Valeant Pharma had kicked off its acquisition spree with Brazilian sports nutrition and food supplements company Probiotica Laboratorios Ltd.

Our Recommendation

We currently have a Neutral long-term recommendation on Valeant Pharma. The stock carries a Zacks #1 Rank (Strong Buy rating) in the short run.

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