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ValueAct Capital Raises Its Stake in Valeant Pharmaceuticals

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ValueAct Capital and Valeant Pharmaceuticals International

During 4Q14, ValueAct Capital increased its position in Valeant Pharmaceuticals International (VRX). The fund holds 19,383,877 shares of VRX, which account for 17.38% of the fund’s total 4Q14 portfolio, up from 16.64% of the fund’s 3Q14 portfolio with 18,923,877 shares.

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About Valeant Pharmaceuticals International

Valeant Pharmaceutical International is a multinational specialty pharmaceutical and medical device company. The company develops, manufactures, and markets a broad range of branded, generic, and branded generic pharmaceuticals, over-the-counter (or OTC) products, and medical devices such as contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices. The company markets its offerings in over 100 countries.

Over the past few years, the company has expanded its portfolio offerings and geographic footprint through numerous acquisitions, including Bausch & Lomb Holdings Incorporated and Medicis Pharmaceutical Corporation.

Valeant to acquire Salix Pharmaceuticals

On February 20, Valeant agreed to acquire Salix Pharmaceuticals (SLXP), a gastrointestinal company with a portfolio of 22 total products for $158 per SLXP share. The total enterprise value of the transaction is $14.5 billion. The combination is expected to achieve annual cost synergies of $500 million. The deal is expected to close in 2Q15.

Solid fourth quarter 2014 growth

Fourth quarter revenue was $2.3 billion, up 10% on a year-over-year (or YoY) basis. The increase was mainly driven by the US operations, and partially offset by negative foreign exchange impact. Cash earnings per share (or EPS) grew 20% to $2.58. Generally accepted accounting principles (or GAAP) EPS was $1.56. GAAP cash from operations was up 191% to $816 million, including a $287 million gain from investment in Allergan (AGN).

For full-year 2014, revenue grew 43% to $8.3 billion. GAAP EPS was $2.67. Adjusted operating cash flow was $2.5 billion.

For 1Q15, the company expects cash EPS to be at least $2.30. For the full-year 2015, revenue is projected to grow by 14% to 15% to be in the range of $9.2 billion to $9.3 billion.

You can gain exposure to Valeant Pharmaceuticals by investing in the Vanguard FTSE All-World Ex-US Index Fund (VEU). Valeant accounts for 0.25% of VEU. VEU also has positions in other healthcare companies, including AstraZeneca (AZN) and Novartis AG (NVS).

In the next part of the series, we’ll discuss ValueAct’s position change in Allison Transmission Holding.

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