Valeant case_.docx - Valeantu2019s Battle for Allergan 1...

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Valeant’s Battle for Allergan 1. Why does Valeant wish to acquire or merge with Allergan? Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings. Chief Executive Michael Pearson said in January the drug maker wants to become one of the world’s top five pharmaceutical companies by market capitalization by the end of 2016, largely through acquisitions. The two drug makers have quite a bit of overlap when it comes to their businesses; Valeant plays in eye care, skin care, gastrointestinal remedies and women’s health, all of which fall under Allergan’s list of core therapeutic areas. Valeant is significantly indebted, has significant potential liabilities and has exclusivity risks. Allergan has problems with its No. 2 product Restasis, but new launches should offset the decline. Both companies offer attractive valuations and good upside in 2017. Acquiring Allergan would allow Valeant significant cost savings both in its dermatologic and eye care product lines, but additional bottom-line benefits could come from reducing Allergan's R&D budget and leveraging Valeant's friendly tax structure. Allergan had expected to spend 16.5% of its net sales on R&D this year, and for taxes to account for between 26% and 27% of non-GAAP earnings. Combined, those two-line items represented nearly $1.5 billion in expenses during 2013. Valeant would cut that R&D spending to about $300 million, and it expects the effective tax rate on the newly combined company would only be in the high single digits. 2. What potential value does Valeant believe it can create with the merger with Allergan? As per the Valeant, the potential qualities that they can carry after the merger with Allergan are: - a. They have amazingly skilled and dedicated business pioneers who are ceaselessly working and constantly centered around conveying development. They have constantly kept up and quickened the income development for almost every stage they have gained up until this point. b. They had gained Bausch and Lomb's business and quickened their development from 4% to 10% since its procurement. They have dependably stayed on track to overachieve unique cost cooperative energy targets. c. They have yield driven Research and Development approach that has propelled a greater number of items than any of its rivals. As in 2014, they have propelled around 19 items in the US showcase.
d. They guaranteed to convey Allergan's post-endorsement necessities at lower cost and they would keep on putting resources into any conceivable development signs like Botox. e. They have a solid reputation of shrewd and restrained capital organization that has created unrivaled money on money returns on the acquisitions. They are in every case fundamentally in front of the first arrangement of income ages f. Their working model will significantly quicken the Allergan's development in developing markets.

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