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Valeant Deal Wraps Up, But Not Before Parting Shots

Valeant Pharmaceuticals International has officially crossed over to Canada.

Last week, shareholders of the Aliso Viejo company and Canada’s largest drug maker, Biovail Corp., approved Biovail’s $3.2 billion buy of Valeant.

Valeant and Biovail said 99% of their shareholders signed off on the deal.

The combined drug maker retained the Valeant name and Chief Executive J. Michael Pearson. But the company’s headquarters now is in Canada to take advantage of tax breaks and other savings.

That’s caused some controversy as the company plans to cut 1,100 jobs, or about 25% of the combined workforce.

Before the shareholder votes last week, California Democratic Assemblymen Kevin de Leon and Jared Huffman—neither of whom represents the district Valeant had been based in—asked the Securities and Exchange Commission and Justice Department to take a second look at the deal.

De Leon and Huffman contend the deal stands to slash California jobs and tax revenue.

Valeant told Reuters that it wouldn’t comment on the letters.

Analyst William Tanner of Lazard Capital Markets told Reuters he doesn’t see the deal coming undone.

“I don’ think there’s a chance that this is not going to happen,” Tanner said.

Another notable critic of the deal is more worried about debt.

Eugene Melnyk, Biovail’s colorful and controversial founder, told Canadian Broadcasting Co. the Biovail-Valeant combination is “doomed to fail” under a huge debt load.

Melnyk said he was concerned about how much debt was required to complete the deal.

Valeant has issued about $1 billion in debt due in 2015 and taken out a loan of $625 million to $675 million. The company also struck a $175 million revolving credit line.

“They won’t be able to pay back the debt,” Melnyk said. “It is doomed to fail in two or three years.”

Separately, Standard & Poor’s is replacing Valeant in its MidCap 400 index with Baldor Electric Co., a Fort Smith, Ark.-based maker of industrial electric motors, mechanical power transmission products, drives and generators.

Allergan Update

A Food and Drug Administration panel of outside experts plans to meet Dec. 3 to determine whether Irvine drug maker Allergan Inc.’s Lap-Band weight-loss device should be used for a wider range of patients.

Allergan wants to sell the device for people who have a body mass index of 35, or even 30 for those with other complications.

Lap-Band now is approved for people who have a BMI of at least 40, or 35 in conjunction with other problems such as Type 2 diabetes.

The device makes up 67% of the stomach band weight-loss market, which is pegged at roughly $300 million to $400 million a year.

Earlier this year, Allergan started a public education and information campaign aimed at gaining wider acceptance and insurance coverage of Lap-Band.

Allergan got Lap-Band through its $3 billion buy of Santa Barbara’s Inamed Corp. in 2006.

In other Allergan news, last month the FDA approved the company’s Ozurdex implant for treating uveitis, a form of eye inflammation that affects the back of the eye but isn’t infectious.

Ozurdex is a biodegradable polymer placed in the back of a patient’s eye to release dexamethasone, an anti-inflammatory drug.

The implant already is approved for treating macular edema, a swelling condition that comes from diseased blood vessels in the retina and threatens eyesight.

Allergan got the implant, which was once known as Posurdex, in 2003 through a $230 million buy of Sunnyvale-based Oculex Pharmaceuticals Inc.

Bits and Pieces:

ChromaDex Corp., an Irvine maker of research tools for dietary supplements and the food and beverage industries, said it started a clinical trial at the University of Mississippi for its pterostilbene compound. ChromaDex has said pterostilbene has shown promise for improving heart health, blood sugar levels and cognitive function … Irvine medical software maker Quality Systems Inc. recently appeared at JMP Securities’ annual healthcare conference in New York … Placentia-Linda Hospital opened a surgical pavilion and gastroenterological center on its campus in Placentia … The Orange Coast Center for Surgical Care, a venture of doctors and Fountain Valley’s Orange Coast Memorial Medical Center, received accreditation from the Joint Commission, a private nonprofit that reviews healthcare facilities.

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