Valeant Pharmaceuticals International Inc. increased its original $6.50-per-share bid on Dec. 16 to $7.50 per share on Jan. 17, with a possible increase to $8.50 after it reviews ISTA's financials. However, the figure still falls far below what ISTA President and Chief Executive Officer (CEO) Vicente Anido Jr., PhD, believes is a fair offer for the company.
Calling the original offer "grossly inadequate," Dr. Anido said the Valeant bid is about half what he would expect, given ISTA's nearly $160 million in revenues in 2011. He noted that Inspire Pharmaceuticals sold last year for four times its revenues, and Alcon Inc. for five times its revenues. On that model, an acceptable bid might reach $640 million.
Dr. Anido said the sales discussions were part of an annual exercise to determine the best strategic value for ISTA's shareholders and a desire to close a gap between what company officials believe is the underlying value of the company and its much-lower share prices. In mid-January, ISTA shares were trading at $8.13, but have traded between $2.88 and $11.39 over the past year. "It's frustrating that there's this discrepancy," Dr. Anido said.
The board decided to open the process to invite companies to consider acquiring ISTA and fielded "an awful lot of phone calls" from interested buyers. A number of them have signed confidentiality agreements and been given access to the company's financials. Dr. Anido declined to specify the companies or how many were interested.
"It's a pretty robust process going on now," he said. "We've had a lot of interested buyers; just because one is yelling and screaming and trying to set deadlines, we're not going to shortcut our process just for them."
When Valeant made its offer, it asked for due diligence information on ISTA, with a Jan. 31 deadline on its offer. In a Jan. 17 letter to Dr. Anido, Valeant CEO J. Michael Pearson said he was "perplexed" by what he said was ISTA's failure to follow up on his offer, and it was "inexplicable that ISTA has not acted more promptly."
"We remain very frustrated, and question why the ISTA board of directors is not acting to enter into our premium transaction while it is available, rather than chase a theoretical other offer that may not materialize," Pearson wrote. Valeant's media relations office did not respond to Ophthalmology Times' request for an interview.
Pearson said Valeant's increased proposed price of $7.50 "pre-diligence" and $8.50 "after diligence" represents a 94% and 120% premium, respectively, to ISTA's share price just prior to its offer, which is "a compelling opportunity for ISTA's shareholders, in light of the continuing challenges facing ISTA."
Pearson said ISTA intends to continue its sale process until March. Dr. Anido said he was unable to discuss the specifics of the agreements with potential buyers.
Since it was formed in September 2010 by the merger of Biovail Corp. and California-based Valeant Pharmaceuticals International, Valeant has spent nearly $3 billion in acquisitions with a goal to become a top-15 global pharmaceutical company by the end of 2013, Pearson told The Canadian Press earlier this month. Last year, Valeant saved $320 million by closing 11 facilities and eliminating 1,100 jobs.
Valeant's most recent deals have included a $425 million acquisition of a dermatology company, Dermik, and a $714 million deal to acquire iNova, a private Australian drugmaker. It has a small foundation in ophthalmology, with about $20 million or $30 million in former Merck holdings.