Strategic eye care acquisition
Bausch + Lomb, the global leader in eye health, is the owner of several eye health brands including PreserVision, PureVision, renu and VICTUS. It was estimated to generate around $3.3 billion in revenue and about $720 million in 2013 EBITDA. Thus, with around a $8.7 billion offering price, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has valued Bausch + Lomb at around 12 times its EBITDA. Valeant seems to make the right move to leverage the increasing demand in eye health, resulted from a growing demand in emerging markets, aging population and an increasing number of diabetes patients. Michael Pearson commented that with Bausch + Lomb’s eye care comprehensive portfolio, it would be a great “strategic fit” with Valeant’s ophthalmology business. He said: “With this transaction, Valeant will be a worldwide leader in both dermatology and eye health.”
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) reported that they would finance the acquisition with around $1.5 billion to $2 billion of new equity, and debt. After the transaction, Valeant pro-forma debt/adjusted EBITDA would be around 4.6. Interestingly, the company commented that if we assumed the transaction occurred at the beginning of the year and full synergies had been achieved, the acquisition would have been accretive as much as 40% to its 2013 cash EPS. By the end of 2014, it was expected to realize around $800 million in annual cost savings. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is trading around $85 per share, with the total market cap of around $25.90 billion. With Bausch + Lomb’s acquisition, its 2013 EBITDA would be around $2.7 billion.
Competing directly with Novartis and Allergan
Valeant would be competing directly with other leading players in ophthalmology, including Novartis AG (NYSE:NVS) and Allergan, Inc. (NYSE:AGN). Novartis has Lucentis as its leading ophthalmic product. It was a biotech eye therapy, used in the treatment of wet macular degeneration and visual impairment caused by diabetes, with approval in more than 100 countries. Lucentis has experienced a consistently high growth in business franchise revenue, from more than $1.5 billion in 2010 to nearly $2.4 billion in 2012.
Allergan is also the leader in eye care, with its best selling product being Restasis. According to the company, it is the biggest prescription ophthalmic product in the U.S. as measured by revenue. Its eye care pharmaceutical product was the biggest revenue contributor, accounting for as much as 47.4% of its total 2012 revenue. For the past three years, its eye care pharmaceuticals product revenue also consistently increased, from $2.26 billion in 2010 to $2.7 billion in 2012.
