Valeant Pharma Sees Strong Q3 Results, Urges Allergan To Hold Merger Talks

(RTTNews) - Canadian drug maker Valeant Pharmaceuticals International Inc. (VRX, VRX.TO) said Wednesday that it expects earnings for the third quarter to be better than its own guidance and revenue to beat analysts' expectations.

In a letter to Allergan Inc. (AGN), Valeant Pharma expressed its continued willingness to negotiate a mutually agreeable merger deal with the Botox maker. The company also said that that Allergan's purported concerns about Valeant Pharma's business were "completely unfounded and disingenuous".

In April, Valeant Pharma along with billionaire investor William Ackman's hedge fund Pershing Square Capital Management, L.P. made a hostile bid to acquire Allergan for $46 billion in cash and stock, but the offer was rejected by Allergan. Pershing Square is the largest shareholder in Allergan with a 9.7 percent stake.

In May, Valeant Pharma sweetened its bid for Allergan to about $53 billion in May, but that offer was again spurned. Allergan has called Valeant Pharma's business model unsustainable and said that a deal with Valeant Pharma would hurt its research and development program.

Valeant Pharma said Wednesday that it expects its third-quarter results to be better than consensus on revenue, and be better than the guidance provided by the company in its second-quarter earnings call for cash earnings per share, organic growth, restructuring charges and adjusted cash flow from operations.

Further, the company said it expects overall same-store organic growth, unadjusted for generics to exceed 15 percent in third quarter, with double-digit growth across almost all of its majority businesses and geographies. The company also expects Bausch + Lomb to continue to deliver more than 10 percent same store organic growth on an unadjusted basis.

In addition, the company expects continued strong double-digit same store organic growth in the fourth quarter.

Valeant Pharma said that its chairman & CEO Michael Pearson today sent a letter to Allergan CEO David Pyott and Lead Independent Director Michael Gallagher, calling for negotiations on a merger.

In the letter, which follows the previous correspondence between the two parties, Valeant Pharma issued the update on its expected third-quarter results and expressed its continued willingness to negotiate a mutually agreeable merger deal with Allergan.

Pearson noted that in the letter that it has been five months since it proposed a combination with Allergan, and added that it is committed to the transaction.

"While we would much prefer avoiding a three-month proxy contest, we will pursue it if we need to," Pearson said in the letter.

Further, Pearson said that Valeant Pharma was prepared to meet directly with Allergan CEO Pyott or the company's board of directors to answer any questions they may have about the company's business. He added that Valeant Pharma is open to seeing any information Allergan may have which would show that there is more value for that company.

Allergan has agreed to unconditionally call and hold a special meeting of its shareholders on December 18. At the special meeting, Pershing Square plans to rejig the Allergan board and push forward the takeover bid.

VRX is trading at $121.25, up $5.30 or 4.57 percent on a volume of 1.13 million shares.