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Valeant Inks Deal to Divest iNova Pharmaceuticals for $930M


Valeant Pharmaceuticals International, Inc. VRX announced that it has signed a deal to sell iNova Pharmaceuticals for $930 million in cash to a company jointly owned by funds advised and managed by Pacific Equity Partners and The Carlyle Group.

Shares of Valeant Pharma have underperformed the Zacks classified Medical-Drugs industry year to date. The stock lost 13.8% as against the industry’s gain of 3.4%.

In fact, this deal is a part of company’s strategy to strengthen its balance sheet and simplify its operating model. Valeant Pharma will utilize the proceeds from the sale to permanently repay term loan debt under its Senior Secured Credit Facility. The sale is expected to complete in the second half of 2017, subject to customary closing conditions, and the receipt of regulatory approvals.

Debt reduction continues to be a priority for Valeant Pharma, and as of May 9, 2017 the company reduced the principal amount of its debt by $3.6 billion since first quarter of 2016. This includes $1.3 billion of debt retired in the quarter along with proceeds from the non-core asset sales, including the sale of three skincare franchises to L'Oreal, which closed on Mar 3, 2017.

iNova markets prescription and over-the-counter products in areas such as weight management, pain management, cardiology, and cough and cold. Moreover, the company has a leading market position in Australia and South Africa and also has an established platform in Asia.

Notably, Valeant Pharma acquired iNova from Australian private equity firms Archer Capital and Ironbridge in Dec 2011 and paid 625 million Australian dollars as upfront payment to shareholders of iNova.

Zacks Rank and Stocks to Consider

Valeant Pharma carries a Zacks Rank #3 (Hold). Better-ranked stocks in health care sector include VIVUS, Inc. VVUS, MEI Pharma, Inc. MEIP and Sanofi SNY. While VIVUS and MEI Pharma sport a Zacks Rank #1 (Strong Buy), Sanofi carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

VIVUS’ loss per share estimates narrowed from 50 cents to 39 cents for 2017 over the last 60 days. The company posted positive earnings surprises in all four trailing quarters, with an average beat of 233.69%. The share price of the company increased 4.4% year to date.

MEI Pharma’s estimates moved up from loss per share of 1 cent to gain per share of the same for 2017, over the last 60 days. The company posted positive earnings surprises in three of the four trailing quarters, with an average beat of 66.56%. The share price of the company increased 26.4% year to date.

Sanofi’s earnings per share estimates increased from $3.26 to $3.30 for 2018 over last 30 days. The company posted positive earnings surprises in three of the last four trailing quarters, with an average beat of 5.10%.

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