(Reuters) – Valeant Pharmaceuticals International Inc , Canada’s biggest public drugmaker, reported a drop in quarterly net profit on Friday, hurt by costs associated with its long string of acquisitions, but revenue jumped almost 50 percent and adjusted earnings rose.
Montreal-based Valeant, whose shares were little changed after the results, has been on the acquisition trail since its 2010 takeover by Biovail Corp, which assumed the Valeant name.
One of its latest deals was the $ 2.6 billion purchase of Medicis Pharmaceuticals Corp , a top competitor in the U.S. dermatology market, in early September. Regulatory approval is still pending.
On a conference call on Friday, Valeant Chief Executive Michael Pearson said annual cost savings associated with the Medicis deal will likely “significantly exceed” his company’s $ 225 million forecast.
“It’s definitely looking good for 2013,” Morningstar analyst David Krempa said of the Medicis update. Krempa added that Valeant’s results for the third quarter, ended September 30, were in line with his expectations.
In its acquisition campaign, Valeant, with a market value of about C$ 17 billion ($ 17 billion), has favored segments where patients often pay out of pocket, such as opthalmology and dermatology, cutting its exposure to cost-sensitive insurers.
Also in September, Valeant acquired Visudyne, a drug used to treat age-related blindness, from Canadian biotech company QLT Inc for $ 112.5 million.
TRACK RECORD
Pearson gave an annual update on the performance of Valeant’s larger deals, looking at 11 acquisitions made since the fall of 2008 for purchase prices of $ 75 million or more.
He said 10 of the 11 are ahead of Valeant’s initial revenue forecast, and nine are more than 10 percent ahead on expected cash flow.
The laggard is cold and flu medicine maker Afexa, won in a takeover battle with Paladin Labs Inc last year. Pearson said Afexa’s results were held back by high inventory at the time of the acquisition, and a mild winter in Canada.
“I thought it was interesting to note that (Afexa) was the only one they had gotten into a bidding war for,” said Krempa. “They had talked in the past about how they tried to avoid bidding wars so they wouldn’t overpay for anything.”
But Krempa also said that given the short-term issues highlighted by Pearson, it might be too soon to judge the Afexa deal, and that it is small in any case.
Net income for the quarter fell to $ 7.6 million, or 2 cents a share, from $ 40.9 million, or 13 cents per share, a year earlier.
On an adjusted basis, income rose to $ 357.5 million, or $ 1.15 a share, compared with $ 211.9 million, or 66 cents a share. Total revenue rose 47 percent to $ 884.1 million.
Analysts, on average, had been expecting earnings per share of $ 1.12 on revenue of $ 873.3 million, according to Thomson Reuters I/B/E/S.
GUIDANCE
The company narrowed its forecast for the current quarter’s adjusted profit, which it calls cash earnings per share, to $ 1.30 to $ 1.35 for 2012. It had previously forecast earnings between $ 1.25 and $ 1.45 per share.
But Valeant said the updated forecast excludes a new 12 cents a share interest expense associated with the Medicis deal. If included, that cost would bring the forecast below previous guidance, to $ 1.18 to $ 1.23 a share.
For 2012 as a whole, the company cut its forecast for adjusted cash flow from operations to $ 1.2 billion to $ 1.3 billion, from more than $ 1.4 billion, citing higher investment in working capital.
Valeant’s stock was down 0.2 percent at C$ 56.44 on Friday morning on the Toronto Stock Exchange.
($ 1=$ 1.00 Canadian)
(Additional reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Janet Guttsman; and Peter Galloway)
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Valeant revenue jumps, acquisitions hit net profit
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