Valeant was the talk of the town (or at least Union Square) on day two of the 2017 J.P. Morgan Healthcare Conference.
On Tuesday morning it announced two major divestitures, most notably selling its immunotherapy company Dendreon for $819.9 million to a Chinese conglomerate called Sanpower Group. It also raised $1.3 billion through the sale of three skin care franchises to L’Oreal.
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For many analysts, it was a good move. Valeant is saddled with debt. By the end of 2016 it had ballooned to $29.8 billion, pushing the company to try to offload its gastrointestinal business, Salix, to lower the amount.
Takeda was the frontrunner, but no deal was reached. So like many of us, it started the New Year needing to slim down elsewhere.
The combined $2.12 billion generated through the sales is a significant sum of money, but there’s a long way to go.
Valeant CEO Joe Papa appeared on CNBC’s Halftime Report later in the day, stating that the overarching goal is to pay down $5 billion in debt over the next 18 months, through asset sales and earnings.
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Valeant shares increased around 11 percent in early morning trading and closed the day up around 6.8 percent.
The asset sales were well timed ahead of Valeant’s 5 p.m. presentation to the J.P. Morgan crowd. Papa addressed some of the negativity straight on. In one slide, he addressed the claim that Valeant is now selling assets at distressed prices.
Dendreon was purchased at a bargain price for approximately $450 million in 2015. It is now being sold for 7 times more than its earning contributions. The skincare brands will go for more than 20 times, according to the presentation slide.
Despite the somewhat positive move, many analysts are reluctant to act on a company with so much uncertainty. It’s leadership changed last year, it testified before Congress and become public enemy number one on the basis of its price gouging tactics.
One analyst shared his mixed feelings on Seeking Alpha.
The situation remains too uncertain for me to consider, although it seems really wise for those who had short position to close and lock in some profits, as management is making good moves at good prices.
Photo: IvelinRadkov, Getty Images
