UPDATE 2-Valeant raises profit forecast, hunts for deals

Thu May 2, 2013 9:21am EDT

* First-quarter net loss $0.09/share vs $0.04 year earlier
    * Total revenue rises 25 percent
    * Sees 2013 cash EPS $5.55-$5.85 vs prior fcast $5.45-$5.75


    By Rod Nickel and Bhaswati Mukhopadhyay
    May 2 (Reuters) - Valeant Pharmaceuticals International Inc
 , Canada's biggest publicly traded drugmaker,
raised its full-year adjusted profit forecast on Thursday and
said it would seek acquisitions in markets avoided by its
stiffest competition.
    The fast-growing drugmaker said it now expected an adjusted
2013 profit, which it calls cash earnings, of between $5.55 and
$5.85 per share, up from its previous forecast of $5.45 to
$5.75.
    Valeant is pursuing deals with strong cash flow in
high-growth areas where big pharmaceutical companies have little
presence, Chief Executive Michael Pearson said, ruling out
western Europe, Japan, China and India. 
    "I don't think small players can win in these markets when
all the big pharma is highly focused on (them)," Pearson said on
a conference call. "What we're not interested in is being a
niche player in these markets."
    The company, whose products include antidepressant drug
Wellbutrin and over-the-counter remedy Cold-FX, said it would
not comment on market speculation, which has focused in the past
week on merger talks with U.S. generic drugmaker Actavis Inc
.
    Actavis said it is in routine discussions that include
large-scale mergers and acquisitions and product transactions,
but would not comment on specific activities. 
        
 
    The company earned $405.2 million, or $1.30 per share, on an
adjusted basis in the first quarter, a rise of 12 percent from
$360.3 million in the same quarter last year due to higher
product sales. 
    Total revenue jumped 25 percent to $1.07 billion. Product
sales rose 38 percent, driven by robust growth in Poland,
Russia, Brazil, Southeast Asia and South Africa.
    The adjusted profit per share beat the average analyst
estimate of $1.25, but revenue fell slightly short of
expectations for $1.09 billion, according to Thomson Reuters
I/B/E/S.
    Investors are likely to take encouragement from the
quarterly results and earnings guidance increase, given concerns
that include generic competition from Mylan Inc for
Valeant's herpes ointment Zovirax, said analyst Chris Schott of
JPMorgan.
    Valeant said last month that the competition for Zovirax
would weaken its cash earnings per share for the year by 30-40
cents. 
    Valeant said its net loss, using generally accepted
accounting principles, widened to $27.5 million, or 9 cents per
share, from $12.9 million, or 4 cents per share, a year earlier
as expenses increased 4 percent, mainly due to the integration
of Medicis Pharmaceuticals Corp.
    Valeant has been on the acquisition trail since its 2010
takeover by Biovail Corp, which assumed the Valeant name. 
    It has favored segments where patients often pay out of
pocket, such as opthalmology and dermatology - a strategy that
cuts its exposure to cost-sensitive insurers.    
    A proposed merger of Valeant and Actavis, the third-largest
global generic drugmaker, was put on hold recently after the
companies failed to agree to the terms of a deal, a source
familiar with the situation told Reuters last week.
 
    Actavis, formerly known as Watson Pharmaceuticals, on
Thursday reported an adjusted quarterly profit that beat market
estimates, helped by several new products, and the company
raised its earnings forecast for the full year. 
    Valeant on Thursday reiterated its revenue forecast of $4.4
billion to $4.8 billion for the year.
    Valeant shares closed at C$74.28 on the Toronto Stock
Exchange on Wednesday.
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