BUSINESS

Valeant Pharmaceuticals posts higher second profit, raises 2013 guidance

08/07/2013 09:36 EDT | Updated 10/07/2013 05:12 EDT
LAVAL, Que. - Valeant Pharmaceuticals International Inc. (TSX:VRX) plans to push ahead with small acquisitions following its recent $8.7-billion mega deal to buy Bausch + Lomb but a "merger of equals'' can't be ruled out, Valeant's CEO said Wednesday.

"We continue to see interesting opportunities around the world and we would expect to be active with tuck-in acquisitions over the rest of the year," chief executive Michael Pearson said in a conference call.

"Small tuck-ins, that's just part of how we do business. Those are sort of bread and butter for us."

But there are ongoing conversations about a possible merger after Valeant integrates the Bausch + Lomb eye care company in 2014.

"It's going to take the right situation," Pearson told analysts on the call. "It can't be predicted, it takes two sides to reach agreement, but we continue to have the discussions."

In the meantime, Valeant will continue to focus on speciality segments and "attractive geographic markets," and has no plans to change course and start spending on research and development.

"We think we can be successful by not doing what large pharma companies are doing," Pearson said.

Valeant revised its 2013 outlook Wednesday, saying it now expects cash earnings of between $6 and $6.20 per share for the year, up from $5.55 to $5.85 after posting a 34 per cent increase in profits for the second quarter.

That includes the negative impact of 11 cents from pre-closing interest expense and additional share count associated with its financing of the Bausch + Lomb deal, as well as a hit of six cents per share from foreign exchange movement.

The company also said it expects to realize "significantly more" than $800 million in synergies from that deal, which include a previously announced staff reduction of up to 15 per cent. Valeant began handing out layoff notices this week in the U.S., but has no specific timeline for the overall cuts to staff in both companies.

Chief financial officer Howard Schillier said in the call that the bulk of the savings will come from cutting general and administrative expenses, as well eliminating Bausch + Lomb's regional infrastructure and reducing spending on marketing and research and development. Bausch + Lomb is one of the world's best-known makers of contact lenses.

"We just run a leaner G&A cost structure than other companies," Schillier said.

"We tend to run, consistent with our model, very lean or no regional infrastructure. On areas like R&D we're able to rationalize R&D spend on projects consistent with our model of not taking big bets on risky, early stage projects."

The approach, he added, is consistent with how Valeant has dealt with other acquisitions.

He expects the company to realize $500 million in synergies by the end of this year and the rest in 2014.

Valeant profits amounted to $11 million or three cents per share for the quarter, reversing a loss of $21.6 million or seven cents per share in the same period last year.

Sales were up nearly 34 per cent to $1.1 billion, compared with $820.1 million in the same period last year, boosted by contributions from acquisitions in the skin care and oral health categories.

Excluding a one-time payment of $45 million received in the quarter last year, total revenue increased 41 per cent over the year-ago quarter.

Revenue from developed markets was $792 million, up 37 per cent, while emerging markets revenue was up 26 per cent to $304 million.

-- By Romina Maurino in Toronto.