The specialty pharmaceutical company Valeant Pharmaceuticals International Inc. has raised its offer to acquire the specialty pharmaceutical company Allergan Inc. The new proposal is valued at a total of $166.16 a share, up from Valeant's initial unsolicited bid of $152.89 a share, or $45.7 billion, in which Valeant made in April 2014. Valeant also upped the cash consideration of the deal by $10.00 per share to $58.30 per share and added a contingent value right for sales of DARPin, Allergan’s developmental drug candidate to treat age-related macular degeneration..

In a letter to Allergan Chairman and CEO  David Pyott,  Valeant Chairman and CEO J. Michael Pearson said: “We would be delighted to provide you and the Allergan board with the opportunity to better understand our business model and address any concerns that you may have. This can be best accomplished by an in-person meeting with our team to better understand our business. A meeting of our respective teams will allow you to review the facts regarding our offer and enable you to provide your board with the information necessary to fulfill its fiduciary duty in assessing the value of a Valeant-Allergan business combination.”

In response, Allergan said it “will carefully review and consider the revised proposal and pursue the course of action that the board believes is in the best interests of the company and all of its stockholders,” said the company in a statement issued May 28, 2014. “No action by Allergan’s stockholders is required at this time.” 

In that presentation, Allergan said that it believes that Valeant’s organic sales growth, which it said is primarily driven by price increases, is overstated based on changing definitions and classifications with no disclosure of key products.”The pro-forma revenue growth from Valeant’s SEC filings paints a picture far different from what is communicated to investors.” Allergan  also questioned the return of two other large-scale acquisitions of Valeant, the $8.7-billion acquisition of  Bausch & Lomb in 2013 and the $2.6-billion acquisition of Medicis Pharmaceutical Corporation in 2012.

Allergan further raised concerns over Valeant’s ability to execute sales promotion of acquired Allergan products. “Valeant’s limited experience with large, global scale products represents a material execution risk attempting to grow Allergan’s categories and launching significant new large products through existing channels. Allergan would be Valeant’s largest acquisition and the synergies proposed by Valeant are the most aggressive to date. Botox’s annual sales are more than seven times greater than each of Valeant’s largest products, Zovirax and Wellbutrin, which are declining or stagnant,” said Allergan in the statement. Allergan also raised issues with the ability of Valeant to realized cost synergies if a combination of the two companies were to occur. “Valeant will only be able to achieve a fraction of its stated SG&A and R&D synergies without destroying Allergan’s near-term and long-term value. Valeant has indicated it will maintain R&D required for post-approval and maintenance, product line extensions, and late phase projects, but drastically underestimates the spend required by approximately $350 million.

In a separate move, Valeant announced that it had agreed to sell all rights to Restylane, Perlane, Emervel, Sculptra, and Dysport owned or held by Valeant for $1.4 billion in cash to Nestle S.A. Nestle expects to complete its acquisition of Galderma S.A. in July and would expect to operate the acquired assets through Galderma.  The transaction is subject to customary closing conditions, including clearance or early expiration of the waiting period under the Hart-Scott-Rodino (HSR) Act and is not contingent upon a successful transaction with Allergan, Inc. 

Source: Valeant Pharmaceuticals International (revised offer), Valeant (Nestle deal), Allergan (rejection of revised offer) and Allergan (investor presentation).