Valeant’s Dendreon sale will allow the company to better align its product portfolio with its new operating strategy

Published By: Eunice Gettys on January 10, 2017 08:48 am EST

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced on January 9 that its affiliate has successfully entered into a definite agreement to divest all of its outstanding equity interests in Dendreon Pharmaceuticals – a cancer vaccine business. The drug maker would sell its interests to China’s Sanpower Group – the country’s biggest privately owned conglomerate. Under the terms of the agreement, after deal completion, Valeant is expected to add $819.9 million to its cash balance.

According to Valeant CEO, Joseph Papa, the sale will allow the drug maker to enhance its product portfolio and better align it with its new operating strategy. The sale of urological oncology business would mark yet another divestiture of its non-core assets.

The company plans to use the proceeds from Dendreon sale to permanently settle term-loan debt under Valeant’s Senior Secured Credit Facility. Therefore, the transaction, which is currently subject to regulatory approvals and customary closing conditions, is likely to enhance its balance sheet position.

Mr. Papa also mentioned: "We are pleased to take this step forward in our divestiture program and are continuing to evaluate transactions to simplify our business and strengthen our balance sheet."

For this agreement, which is expected to close during the first half of fiscal year 2017 (1HFY17), Centreview Partners served as Valeant’s financial advisor. The company was also represented by Hogan Lovells US LLP in connection with the deal. Moreover, Sanpower Group’s legal advisors include DLA Piper UK LLP and DLA Piper LLP (US).

Out of a total of 22 Wall Street analysts covering VRX, four have rated it as a Buy, one has assigned an Overweight rating, 13 recommend a Hold, one tagged it as Underweight, and three suggested a Sell. The 12-month average PT stands at 24.66, with more than 60% upside potential over the last closing price.