Canada’s Biovail Corp. on Tuesday closed its $3.2 billion buy of Aliso Viejo drug maker Valeant Pharmaceuticals International, amid objections from California lawmakers and Biovail’s founder.
The move creates a drug maker with $1.7 billion in yearly sales that’s run from Biovail’s Toronto-area headquarters with operations in tax-friendly Barbados.
The combined company is taking on the Valeant name and its chief executive, J. Michael Pearson.
The deal does away with the second-largest drug maker based in Orange County after Irvine’s Allergan Inc.
Valeant got its start as ICN Pharmaceuticals Inc. and was based in Costa Mesa before moving to Aliso Viejo in 2006.
The company’s acquisition and power shift to Canada drew criticism from two California lawmakers.
On Friday, Kevin de Leon and Jared Huffman asked regulators to take a second look at the Biovail-Valeant deal, citing concerns about job and tax revenue losses.
Valeant has said that it plans to cut 1,100 jobs, or about 25% of the combined company’s total of 4,400, to cut costs.
Valeant isn’t based in either of the Democratic lawmakers’ districts.
Analyst William Tanner of Lazard Capital Markets said he doesn’t see the deal coming undone after already clearing regulatory hurdles.
“I don’ think there’s a chance that this is not going to happen,” Tanner told Reuters.
Another notable critic of the deal is more worried about debt.
Eugene Melnyk, Biovail’s colorful and controversial founder, told the Canadian Broadcasting Co. the Biovail-Valeant combination is “doomed to fail” under a huge debt load.
Last month, Valeant issued $1.2 billion in debt due in 2015 and took out loans a 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.”
Biovail makes antidepressant, pain and other drugs. Valeant makes neurology, antiviral and generic drugs.
The acquisition closes a chapter in the colorful, storied history of Valeant.
Milan Panic started the company as ICN in 1959 and ran it for decades. A native of the former Yugoslavia, Panic defected from the communist country during a bicycle race and went on to start ICN with $200 and a washing machine as a centrifuge.
As chief executive, Panic grew ICN into a midsize drug maker and was known for his autocratic rule, shareholder and board clashes and several sexual harassment lawsuits.
Panic lost a bitter proxy battle in 2001 with dissident investors who wanted to overhaul ICN’s board and business. He left the chief executive’s role in 2002.
Panic still is on Valeant’s payroll as a consultant.
In 2003, directors and executives renamed ICN as Valeant and set out to streamline and grow the company, with mixed success.
Former chief executive Tim Tyson eventually came under fire from Wall Street for a lack of growth and direction and left in 2008.
Pearson, a former executive at turnaround consultant McKinsey & Co., replaced Tyson.
