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A Valeant effort
March 2011
by Amy Swinderman  |  Email the author


MISSISSAUGA, Ontario—With an eye toward establishing a firmer footprint in central and eastern Europe, Valeant Pharmaceuticals International Inc. recently acquired PharmaSwiss SA, a privately held, branded generics and over-the-counter pharmaceutical company based in Zug, Switzerland.
Bringing annual revenues of more than $246 million to the table, PharmaSwiss garnered nearly $479 million for the deal, which was announced Feb. 1. PharmaSwiss' shareholders could also earn an additional $41 million based upon achievement of certain milestones. As the companies work to combine their resources, Valeant's business in central Europe will be combined under PharmaSwiss' corporate structure in Switzerland.
Although the companies have not worked together in the past, in announcing the acquisition, Valeant cites PharmaSwiss' partnerships with several large pharma and biotech companies (including Amgen, Astellas, BMS, Ferring, Ipsen, Lilly, Norgine, Pfizer and Reckitt-Benckiser)—as well as the company's expertise in regulatory, compliance, sales, marketing and distribution—as one of its rationales for the deal. Valeant also notes that over the past five years, PharmaSwiss has reported 20 percent growth per year.
But perhaps most attractive to Valeant was PharmaSwiss' broad product portfolio in seven therapeutic areas and operations in 19 countries throughout central and eastern Europe—a significant footprint considering that when the company was founded in 2000, it operated only in the six countries of ex-Yugoslavia.  
In particular, Valeant points to PharmaSwiss' presence in Poland, Hungary, the Czech Republic, Serbia, Greece and Israel as important contributions to Valeant's existing geographic footprint. In fact, the company states that after synergies, it expects that the operating income as a percentage of revenue of the combined central and eastern European business will be similar to that of Valeant's historical branded generic European business.
"PharmaSwiss has a unique business model which is very complementary to Valeant's existing business," J. Michael Pearson, Valeant's CEO, tells ddn. "In addition, with the combination of the two companies, we will strengthen our existing markets and expand our geographic reach, moving us to be a leading pharmaceutical company in the central European region."
While the two companies will have some geographic overlap, it's minimal, Pearson adds. "We are excited about the opportunities that an expanded geographical will provide to us—specifically we can introduce our products into their territories, and vice versa," he says. "We are very active in acquiring assets and companies that provide us with additional growth opportunities in all of our markets."
PharmaSwiss employs 760 employees in 19 countries and operates an EU GMP capsuling and packaging facility which is being significantly expanded and backwards-integrated.  
The company's senior management team will remain with Valeant. Pending certain regulatory approvals and customary closing conditions, the acquisition is expected to close in the first or second quarter and to be immediately accretive to Valeant.  
PharmaSwiss deferred all questions to Valeant. In a statement announcing the deal, Pavel Mirovsky, CEO of PharmaSwiss, said, "I am delighted that PharmaSwiss will be joining Valeant. Valeant's additional resources, professional approach, focused pipeline and strong commitment to supporting all three legs of the PharmaSwiss business model (representation of multinationals, licensing from specialty pharma and our brands) will enable us to build up our winning strategy of serving partners. Valeant Europe's strong presence in Poland, the region's largest market, fills an important gap and should contribute to transaction synergies. The message we want to send to our employees, business partners and other stakeholders is one of continuity and commitment to growth."
Code: E031105



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