Is Valeant Shopping 'Til It Drops?

Maybe there should be an equivalent of the Home Shopping Network for pharma companies. That would make things quite convenient for frequent shopper Valeant Pharmaceuticals (NYS: VRX) . The company announced this week that it's buying the top-selling drug of small biotech firm QLT.

This purchase follows closely on the heels of Valeant's announcement of its pending acquisition of Medicis Pharmaceutical (NYS: MRX) . But is Valeant shopping until it drops -- or until its stock drops -- with this recent spending spree? Let's take a look.

Value for Visudyne?
Valeant is paying $112.5 million up front to QLT for Visudyne, a drug used to treat eye problems caused by age-related macular degeneration. The terms of the deal include $62.5 million for U.S. rights and available inventories of the drug. The other $50 million is for purchasing non-U.S. royalties for Visudyne. In addition, Valeant agreed to pay $20 million in contingent payments related to QLT's laser program.

Visudyne sales in the U.S. last year totaled around $21 million. Non-U.S. sales were around $14 million. At first glance, paying a little over three times annual sales for the drug sounds like a fairly good deal.

The problem is that Visudyne sales have been declining significantly. Total revenue generated by the drug during the first six months of 2012 fell 32% compared to the previous year.

Visudyne faces competition from Macugen, which is jointly marketed by Eyetech and Pfizer (NYS: PFE) , and Lucentis from Genentech. Relative newcomer Eylea from Regeneron Pharmaceuticals (NAS: REGN) adds even more competitive pressure.

The potential exists for Valeant to boost sales for Visudyne with its larger sales force and to more effectively position Visudyne as a complementary product to competitive products like Macugen. However, it remains to be seen just how much of a value the company will receive for its investment.

Murkiness with Medicis?
Valeant announced its acquisition of Medicis in early September. The market reacted positively on the news, sending Valeant's shares up nearly 15%.

The price tag for the transaction totaled $2.6 billion. The company gains a nice addition with Medicis' Dysport injection, which should allow Valeant to compete against the dominating market share held by Allergan (NYS: AGN) with its Botox product.

Questions are arising now about the deal, though. Some analysts worry that Medicis's lead product, Solodyn, faces steeper declines than previously expected. IMS Health reported that Solodyn prescriptions plunged 44% in the last week of August compared with the prior year.

Those worries could be overblown. Valeant maintains that the actual decline of sales for Solodyn isn't as bad as initially reported because the data used by IMS does not include Wal-Mart prescriptions and pharmacy mail-order services.

As with the Visudyne purchase, the answer to whether Valeant got a good deal in its Medicis acquisition remains at least a little murky for now.

More shopping
My instinct is to give Valeant the benefit of the doubt. The company seems to have made good decisions in its purchases of Ortho Dermatologics and Dermik last year. Valeant has become fairly adept at assimilating new businesses, with more than a dozen acquisitions since 2010.

According to Valeant CEO Michael Pearson's recent statements, the company plans to do more shopping by the end of the year. Pearson pointed out the potential for several smaller deals, particularly in Southeast Asia. It looks doubtful that Valeant will need any help from a Home Shopping Network for any of its shopping sprees.

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