Staff Writer

As part of an ongoing effort to streamline and focus its operations, Valeant Pharmaceuticals International sold its Western and Eastern European businesses to specialty pharma company Meda AB for $392 million in cash.

The sale is the largest of several recent divestitures at Valeant, a company that "has not been particularly successful" in the last four to five years, Chairman and CEO J. Michael Pearson told investors at the Goldman Sachs Healthcare Conference earlier this summer.

Pearson joined the company in February and concluded, after a two-month global facilities tour, that Valeant was "quite frankly a bit of a mess." He called the company "unfocused" in its diversification, with sales operations in 80 countries but a lack of critical mass anywhere. He also raised concerns about the company's "questionable resource allocation" and low morale.

To turn the Aliso Viejo, Calif.-based company around, Pearson instituted a plan to focus on operations in the U.S., Canada, Mexico and a select few other territories. Accordingly, Valeant sold its commercial operations in Argentina, the Asia Pacific region and now most of Europe. (See BioWorld Today, March 4, 2008.)

Under the European deal, Stockholm, Sweden-based Meda will acquire Valeant's business units in several countries, including the UK, Germany, Italy, Spain and Russia. Altogether, the units employ 380 workers.

Meda also gets rights to Valeant's marketed products in those territories, including the myasthenia gravis drug Mestinon (pyridostigmine bromide), the Parkinson's disease drug Tasmar (tolcapone) and several dermatology products.

Valeant's Western and Eastern European operations generated approximately $180 million in revenues in 2007.

Not included in the sale were Valeant's businesses in Central Europe, specifically in Poland, Hungary, Slovakia and the Czech Republic. Operations in the Central European territories generated approximately $120 million in revenues in 2007, and Pearson said Valeant is considering spinning that region out with an initial public offering.

The geographic streamlining at Valeant is expected to result in the elimination of about 1,250 positions globally. Additionally, 130 jobs in the U.S. and Mexico have been cut in an effort to get expenses in line with revenues. Mexico in particular has presented profitability problems for Valeant, but Pearson said the company is "taking the right steps" to correct the problems, including replacing management, redeploying the sales force and rebuilding distributor relationships.

Pearson's plan also calls for streamlining Valeant's products, with a focus on branded prescription and over-the-counter offerings in neurology and dermatology. To that end, the company in May sold U.S. and Canadian rights to hepatitis C drug Infergen (interferon alfacon-1) to Three Rivers Pharmaceuticals LLC, of Cranberry Township, Pa., in exchange for approximately $70.8 million in cash and up to $20.5 million in milestones.

In terms of research and development, Pearson said he wants to maintain Valeant's internal capabilities and "replenish our pipeline over time."

That pipeline is led by epilepsy drug retigabine, a first-in-class neuronal potassium channel opener that hit its endpoints in two Phase III trials and is slated for a new drug application filing in the third quarter. (See BioWorld Today, Feb. 13, 2008.)

Valeant also is conducting a Phase II trial of retigabine in post-herpetic neuralgia and has additional Phase II programs under way with Taribavirin in HCV and VRX806 in HIV. Earlier-stage programs include a retigabine study in multiple sclerosis, another epilepsy candidate called VRX698 and a nasal spray formulation of an epilepsy drug for controlling acute seizures.

Pearson said Valeant is "actively looking to partner" retigabine and eventually will partner all of its major product candidates to realize their full potential.

Shares of Valeant (NYSE:VRX) rose 8 cents to close at $17.22 on Monday. Shares of Meda (Stockholm:MEDAA) rose SEK2.25 to close at SEK66.25.