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Allergan rejects Valeant's $54 billion bid


By Jaimy Lee
Posted: June 10, 2014 - 3:30 pm ET
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Allergan Chairman and CEO David Pyott said Valeant Pharmaceutical International's “slash-and-burn” strategy of growing through acquisitions is one reason why the board rejected Valeant's most recent offer to buy the Botox maker.

Allergan's board on Tuesday rejected Valeant's May 30 proposal, saying the offer undervalued the company and created risks for stockholders. The deal, Pyott told Modern Healthcare, would likely lead to cuts in spending on research and development, physician education and advertising. And it may mean higher prices for the products Allergan sells.

“The value on the table from Valeant still substantially undervalues the company,” Pyott said.

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Allergan, based in Irvine, Calif., is best known for making Botox, the wrinkle reducer that has also been approved by the Food and Drug Administration to treat a wide range of indications, including overactive bladder, chronic migraines and eye muscle problems. The company is also conducting clinical trials to evaluate Botox for depression, osteoarthritis pain and juvenile cerebral palsy.

Both companies make products in the medical aesthetics and dermatology categories, as well as in neurology and eye care. A merger would likely improve sales efficiencies and build Valeant's product portfolio. But it may also mean higher prices, Ronny Gal, an analyst at Sanford C. Bernstein, said in an interview last week.

Valeant made four acquisitions last year, including an $8.7 billion deal to buy eye-care company Bausch & Lomb. It has grown from an $820.4 million company in 2009 to a $5.7 billion firm in 2013.

Allergan reported $6.3 billion in total revenue in 2013, with Botox sales rising 10% to $1.7 billion.

The Canadian company first proposed a merger with Allergan in mid-April. Its latest offer boosted the bid to $53.8 billion. Allergan said most of Valeant's growth comes from price increases and provided data from IMS Health showing that seven of Valeant's 15 biggest drugs reported double-digit price increases in 2013.

In a May 19 letter to healthcare professionals, Valeant Chairman and CEO J. Michael Pearson said that the company intended to keep investing in direct-to-consumer campaigns that drive patient volume into doctor's offices—Allergan spent $200 million last year on advertising—and to continue to invest in R&D programs.

“This combination will deliver the strongest aesthetic offering, the broadest dermatology portfolio, and provide a real alternative to Alcon in eye health,” Pearson wrote.

Follow Jaimy Lee on Twitter: @MHjlee


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