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Valeant puts dealmaking on hold to focus on the bottom line

December 9, 2014, 1:41 PM UTC
Valeant Offers to Buy Allergan With Pershing's Support
Dr. Keith A. Marcus draws Allergan Inc. Botox into a syringe before administering it to a patient at the offices of Marcus Facial Plastic Surgery in Redondo Beach, California, U.S., on Tuesday, April 22, 2014. Valeant Pharmaceuticals International Inc. offered to buy Allergan Inc., maker of the Botox wrinkle treatment, in a cash-and-stock deal valued at $45.7 billion in the latest step of the Canadian company's plan to become one of the world's largest drugmakers. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Photograph by Patrick T. Fallon — Bloomberg via Getty Images

Valeant Pharmaceuticals is putting its acquisition growth strategy on hold in favor of reducing debt and boosting its stock price, according to Reuters.

Since 2008, Valeant has spent about $19 billion on 40 acquisitions. Now, the company will stem those purchases over the next two to three quarters to strengthen its financial fundamentals, sources told Reuters.

Valeant, in partnership with activist investor Bill Ackman, made a hostile bid to purchase Botox-maker Allergan (AGN). The offer failed last month, and now the Canada-based drugmaker is regrouping under a new strategic vision.

As Allergan fought off the company’s advances, it voiced concerns that Valeant’s underlying financial situation was not strong: It masked growth through its ongoing acquisitions, Allergan claimed. The California drugmaker eventually agreed to a $66 billion buyout by Actavis (ACT), successfully deflecting Valeant’s hostile offer.

Valeant (VRX) has more than $16.3 billion in debt as of the end of September and has a junk rating, according to Moody’s. The drugmaker is hoping to improve its credit rating in order to better afford future purchases, sources told Reuters.

The regroup is a change from the norm–Valeant has aggressively pursued other drugmakers as a way to drive fast growth, and, for the most part, it’s worked.

Valeant’s market valuation has grown to more than $48 billion today from about $1 billion in 2008. CEO Mike Pearson has pushed for Valeant to become one of the world’s top five pharmaceutical companies by the end of 2016.

As it hunkers down, Valeant is rewarding shareholders with up to $2 billion in buybacks of senior notes, shares and other securities, the drugmaker announced last month.