UPDATE 3-Valeant aims to become top player in skincare

Fri Jul 15, 2011 4:05pm EDT

* To pay $345 mln for Janssen skincare business

* Follows $425 mln deal for Dermik

* Shares up 4 percent in Toronto (Adds comments from CEO interview, updates shares; in U.S. dollars unless noted)

By S. John Tilak

TORONTO, July 15 (Reuters) - Valeant Pharmaceuticals International Inc (VRX.TO) (VRX.N) wants to become the world's biggest player in the skincare sector in about five years, its top executive told Reuters on Friday.

The company has been signaling its intent with a string of recent mid-sized acquisitions in the highly fragmented but lucrative dermatology sector.

The specialty drugmaker said on Friday it will pay $345 million to buy the skincare unit of Johnson & Johnson-owned (JNJ.N) Janssen Pharmaceuticals.

The news sent the Valeant's shares up 4 percent.

It was the second such deal for Valeant this week. The other was its planned $425 million acquisition of Sanofi's (SASY.PA) Dermik skincare business. Both deals were with large pharmaceutical companies eager to offload non-core assets.

Valeant, which has about 5 percent of the $20 billion market, plans to continue making deals in dermatology as it looks to reach the top faster, Chief Executive Michael Pearson said. When the recent deals close, the company will record about $1 billion in revenue from dermatology.

"We're ambitious in many ways. We just want to be a lot bigger than anyone else," he said in an interview.

While there is significant competition in the dermatology arena, Valeant will be facing smaller rivals, rather than the pharmaceutical giants, which have been beating a hasty retreat from the sector as they look to narrow their focus.

"It's like we're in the lightweight division and we're fighting other lightweights. We're not fighting heavyweights," Pearson said. "It fits us from a scale standpoint."

Pearson's philosophy has been to stay clear of the so-called Big Pharma companies, but engage in partnerships with them instead.

Valeant's main rivals in the industry are Medicis Pharmaceuticals MRX.N, Allergan Inc (AGN.N), as well as Stiefel Laboratories Inc, which is a unit of GlaxoSmithKline (GSK.L).

Since it dropped a $5.7 billion bid for U.S. drugmaker Cephalon Inc CEPH.O in May, there has been speculation that Valeant would go after other large targets. In the same month, the company said it would buy Lithuanian group Sanitas SAN1L.VL for about 314 million euros ($443 million).

The company is still considering larger takeovers and can pull off a $6 billion deal, Pearson said.

"Europe is probably lower in the list right now" because of the two recent sizable deals there, Pearson said. The company could look at regions such as Latin America and Australia, he added.

Mississauga, Ontario-based Valeant, which focuses on the neurology and dermatology markets, expects Friday's deal to add to its earnings in 2011.

"They're out there buying assets for cash flow and building a broad dermatology presence. It seems like a pretty sound strategy to me," Stifel Nicolaus analyst Annabel Samimy said.

"The assets that they're buying are not necessarily the ones that require a significant amount of promotion or expense behind them," she added.

Revenue for the Janssen product portfolio, which includes prescription brands Retin-A Micro, Ertaczo and Renova, was about $150 million in 2010.

Valeant's shares were up 4 percent at C$52.47 in Toronto, and up 4.4 percent at $54.94 in New York.

($1=$0.95 Canadian) (Reporting by S. John Tilak in Toronto, additional reporting by Savio D'Souza in Bangalore)

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