Valeant Pharmaceuticals expects to find $200 million in savings in 2012

TORONTO - Valeant Pharmaceuticals expects to find $200 million of cost savings this year as it works to fully incorporate drug companies acquired in a nearly $3-billion buying spree since merging with Biovail.

Those efficiencies, outlined in a guidance conference call with analysts Friday, are expected to come from shedding redundant departments and jobs.

Valeant Pharmaceuticals International Inc. (TSX:VRX), which has its headquarters near Toronto in Mississauga, Ont., has about 5,000 employees but gave no indication how many jobs would be cut as it streamlines operations.

The company was formed in September 2010 by the merger of Biovail Corp. (TSX:BVF) and California-based Valeant Pharmaceuticals International (NYSE:VRX).

The Biovail merger saved the new Valeant about $320 million last year as the company shuttered 11 facilities and targeted 1,100 jobs, or 25 per cent of the combined workforce, for layoffs.

It now is working to integrate a number of drug makers it bought in 2011 for a total $2.9 billion — including Edmonton-based Afexa, maker of the Cold-FX flu treatment — as part of an ambitious plan for growth.

"Maybe we're crazy, but we all have high aspiration levels for our company," said Valeant chairman and CEO Michael Pearson.

Pearson said that the company hopes to become a top 15 global pharmaceutical company by the end of 2013.

"And if we continue to have the same performance we've had over the past four years, we should get there," he added.

The drug maker said to achieve that goal, it will have to grow into other segments of the drug market, primarily through acquisitions. But it said it doesn't plan to consider a merger to grow.

"Our modus operandi is to continue to buy companies at reasonable prices and see disproportionate returns from those," Pearson said.

The company also outlined that total revenues for 2012 are expected to be between $3.1 billion and $3.4 billion at constant currency rates. That's a 30 to 40 per cent increase over 2011 revenue.

Earnings per share are projected to be between $3.95 and $4.20, which is 40 to 50 per cent higher than in 2011.

Valeant, which focuses on nervous system and skin care therapies, established new growth in emerging markets last year including Southeast Asia, South Africa and Russia.

Most recently, the Canadian drug maker completed a $425-million acquisition of dermatology company Dermik from French pharma giant Sanofi. Dermik makes the acne drug BenzaClin.

The largest acquisition was to acquire iNova, a private Australian drug maker in a deal that could be worth as much as $714 million.

It also signed deals to buy the Ortho Dermatologics division of Janssen Pharmaceuticals Inc. for $345 million; Dermik, a dermatology unit of Sanofi in the U.S. and Canada, for $425 million, and Afexa Life Sciences Inc. for about $88 million.

The company says there is no shortage of buying opportunities, but it is waiting to find the right deal at the right price.

It made a $327-million hostile bid for California-based ISTA Pharmaceuticals Inc. last month in hopes of securing a "critical mass'' for its fledgling ophthalmology business.

For the fourth quarter of 2011, it expects more than $650 million in revenue and earnings of between 83 cents and 87 cents per share. However, it warns that currency headwinds were higher than expected, a factor that could continue to impact earnings in 2012.

By segment, it expects to save $75 million in Europe, through the acquisition of PharmaSwiss an Sanitas, $85 million in the U.S., through the Ortho and Dermik acquisitions, $25 million through the iNova acquisition in Australia and $15 million in Canada through the Afexa purchase.

However, it said it will not provide any specifics on organic growth guidance for 2012.

Shares in the company added 1.5 per cent or 71 cents to close at $48.82 Friday trading on the Toronto Stock Exchange.