A Valeant effort

Seeking a stronger European presence, Canada’s Valeant Pharmaceuticals acquires Switzerland-based PharmaSwiss for more than $500 million

Amy Swinderman
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MISSISSAUGA, Ontario—With an eye toward establishing afirmer footprint in central and eastern Europe, Valeant PharmaceuticalsInternational Inc. recently acquired PharmaSwiss SA, a privately held, brandedgenerics and over-the-counter pharmaceutical company based in Zug, Switzerland.
 
Bringing annual revenues of more than $246 million to thetable, PharmaSwiss garnered nearly $479 million for the deal, which wasannounced Feb. 1. PharmaSwiss' shareholders could also earn an additional $41million based upon achievement of certain milestones. As the companies work tocombine their resources, Valeant's business in central Europe will be combinedunder PharmaSwiss' corporate structure in Switzerland.
 
Although the companies have not worked together in the past,in announcing the acquisition, Valeant cites PharmaSwiss' partnerships withseveral large pharma and biotech companies (including Amgen, Astellas, BMS,Ferring, Ipsen, Lilly, Norgine, Pfizer and Reckitt-Benckiser)—as well as thecompany's expertise in regulatory, compliance, sales, marketing and distribution—asone of its rationales for the deal. Valeant also notes that over the past fiveyears, 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 19countries throughout central and eastern Europe—a significant footprintconsidering that when the company was founded in 2000, it operated only in thesix countries of ex-Yugoslavia.
 
 
In particular, Valeant points to PharmaSwiss' presence inPoland, Hungary, the Czech Republic, Serbia, Greece and Israel as importantcontributions to Valeant's existing geographic footprint. In fact, the companystates that after synergies, it expects that the operating income as apercentage of revenue of the combined central and eastern European businesswill be similar to that of Valeant's historical branded generic Europeanbusiness.
 
"PharmaSwiss has a unique business model which is verycomplementary to Valeant's existing business," J. Michael Pearson, Valeant'sCEO, tells ddn. "In addition, with thecombination of the two companies, we will strengthen our existing markets andexpand our geographic reach, moving us to be a leading pharmaceutical companyin 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 expandedgeographical will provide to us—specifically we can introduce our products intotheir territories, and vice versa," he says. "We are very active in acquiringassets and companies that provide us with additional growth opportunities inall of our markets."
 
PharmaSwiss employs 760 employees in 19 countries andoperates an EU GMP capsuling and packaging facility which is beingsignificantly expanded and backwards-integrated.
 
 
The company's senior management team will remain withValeant. Pending certain regulatory approvals and customary closing conditions,the acquisition is expected to close in the first or second quarter and to beimmediately accretive to Valeant.
 
 
PharmaSwiss deferred all questions to Valeant. In astatement announcing the deal, Pavel Mirovsky, CEO of PharmaSwiss, said, "I amdelighted that PharmaSwiss will be joining Valeant. Valeant's additionalresources, professional approach, focused pipeline and strong commitment tosupporting all three legs of the PharmaSwiss business model (representation ofmultinationals, licensing from specialty pharma and our brands) will enable usto build up our winning strategy of serving partners. Valeant Europe's strongpresence in Poland, the region's largest market, fills an important gap andshould contribute to transaction synergies. The message we want to send to ouremployees, business partners and other stakeholders is one of continuity andcommitment to growth."

Amy Swinderman

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