The Motley Fool investing Web site recently compared the ongoing reinvention of Valeant Pharmaceuticals International to TV show “Extreme Makeover: Home Edition.”
“If you’re seeking a corporate contestant for ‘Extreme Makeover: Home Edition,’ I nominate Valeant Pharmaceuticals,” author Robert Steyer said in an article called “A Valeant Effort.”
Chief Executive J. Michael Pearson has spurred profits at the drug maker by selling off global units, cutting jobs and acquiring companies in his past year.
Aliso Viejo-based Valeant, which makes antiviral, skin and neurology drugs, said in February that adjusted fourth-quarter profits were $43.2 million, up 72% from a year earlier and besting the $23.3 million analysts had been expecting on average.
The higher profits came even as Valeant’s sales declined 3% to $183 million and missed the $185.2 million analysts were looking for.
Valeant ended 2008 up 90%, the best showing of any major Orange County stock last year.
Investors now are looking for Valeant’s cost cutting to give way to growth. Since the beginning of the year, Valeant’s stock is off 25% with a recent market value of $1.4 billion.
The company had “four CEOs, two names and multiple strategies” during the 2000s, Steyer said.
His article also looked into whether Valeant’s efforts to simplify its drug arsenal,its 389 products led to $657 million in sales last year,and whether its focus on dermatology and neurology drugs would be successful.
He wrote that even when Valeant succeeds, it still can make investors nervous.
That’s because there are signs that Valeant isn’t such a good long-term investment, Steyer said. The company is down about 30% in the past five years and has consistently trailed the S & P; 500 and American Stock Exchange drug index, he said.
“Clearly, this isn’t a stock for the faint of heart,” Steyer said.
The company still has some challenges to work through, including that it hasn’t yet received regulatory approval for one of its biggest potential guns in its arsenal,retigabine, an epilepsy drug that it’s working on with GlaxoSmithKline PLC of Britain.
Valeant plans to seek Food and Drug Administration and European approval this year with possible clearance in 2010.
The drug maker could stop working on taribavirin,a successor to its hepatitis C drug ribavirin that is facing generic competition,according to Pearson.
Ultimately, Steyer was cautious about Valeant as an investment: “I would tread carefully,” he wrote. “With many moving parts,all those products around the world,and a big dose of regulatory and (research and development) ‘maybes,’ you have a prescription for uncertainty.”
He noted that the company’s cash and equivalents are hovering around $200 million, reducing its flexibility to buy back stock or make further deals or collaborations.
Valeant must “keep moving” if it wants to break a streak of what Steyer called seven consecutive years of losses,albeit mainly because of restructuring charges,and fulfill Pearson’s ambitions.
“Otherwise, Pearson could become the latest CEO of this company to miss with a valiant effort,” he said.
Global Care Bought
Global Care Quest Inc., an Aliso Viejo maker of digital medical information systems, recently said it was bought in October by Karl Storz Endoscopy-America, a unit of Germany’s Karl Storz GMBH.
Financial terms weren’t disclosed.
Global develops software that pulls together patients’ information into what it calls “dashboards.” The information can be accessed online or through a handheld device.
Surgeons and other doctors use Global’s products to monitor their patients.
Global, which was founded in 2005, was backed by Lexington Ventures LLC, a Beverly Hills-based venture capital firm.
In other acquisition news, Costa Mesa-based investment bank McGladrey Capital Markets LLC recently sold Santa Ana healthcare technology consulting company R3 Health Partners LLC to Vitalize Consulting Solutions of Massachusetts for an undisclosed price.
Sean Walker, a director at McGladrey, has said he expects to see more interest in buying healthcare information technology companies for several reasons, including the Obama administration’s push to adopt healthcare technology as a way to cut costs.
Bits and Pieces:
Laguna Niguel-based Congero Development said that its Renaissance Surgical Arts at Newport Harbor has entered its final phase of construction and is nearing completion. The 20,000-square-foot project, a doctor-owned outpatient surgery center, is expected to open later this spring. Congero declined to give a cost for the project Irvine-based LifeMasters Supported SelfCare Inc., a disease management company, said it introduced what’s called a health activation tool for its coaches to use with chronically ill patients. LifeMasters said that the tool will help patients develop greater motivation, which will ultimately lead to greater confidence in managing their conditions.
