Valeant Pharmaceuticals International, Inc. (NYSE/VRX) is in negotiations to acquire Egyptian drug-maker Amoun Pharmaceutical Company as part of its expansion strategy into emerging markets.
Amoun is one of the largest drug companies in Egypt and offers both human and veterinary medicines in the region. According to the people close to the negations, Valeant may seal a deal with Amoun’s shareholders in the next few weeks, valuing the company between $700 and $800 million, sources said.
The deal is another example of Valeant’s growth-through-acquisition strategy. Over the past few years, management has been on an acquisition spree, buying up small drug-makers and pushing their products through Valeant’s wide distribution network. The company is seeking to become one of the biggest drug companies in the world through acquisition.
Earlier this year, Valeant beat out Endo International plc (NASDAQGS/ENDP) to acquire Salix Pharmaceuticals Ltd. for $11.1 billion. The company also spent much of 2014 attempting to take over Botox-maker Allergan Inc. (XETRA/AG4.DE), but an agreement never came through.
Some of the world’s smartest money managers are backing Valeant’s strategy. In May¸ at the annual Sohn Investment Conference, Pershing Square Capital Management President Bill Ackman said there was a “huge opportunity” in owning Valeant. Ackman sees Valeant doing between $7.0 billion and $20.0 billion worth of acquisitions per year.
“We think these are very reasonable assumptions,” he added. Ackman sees Valeant transforming into a platform company akin to Warren Buffett’s Berkshire Hathaway, Inc., which explains in large part why investors and analysts are having difficulty valuing the company.
However, analysts caution that Valeant may have its own challenges. Over the past few years, the company has had some failed acquisitions. That may not exactly translate into financial losses, but it could account for missed opportunities to grow its market share.