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John Hempton
Articles 

Valeant, Salix, Sales Force and Asset Sales

Several implications

November 30, 2016 | About:

Valeant (NYSE:VRX) put out a press release today about expansion of sales force for their Salix business:

Valeant Announces The Initiation Of A Primary Care Sales Force For Xifaxan® And Relistor®
LAVAL, Quebec, Nov. 29, 2016 /PRNewswire/ -- Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) ("Valeant") today announced that it has initiated a significant sales force expansion to focus on potential primary care physician (PCP) prescribers of Xifaxan for irritable bowel syndrome with diarrhea (IBS-D) and Relistor for opioid induced constipation (OIC.) With the launch of the expanded sales force effort over the coming weeks, the company expects to reach a significant majority of likely Xifaxan and Oral Relistor primary care prescribers. The costs of this program were considered in previously announced guidance for the full year 2016.
"Our goal in building a primary care sales force is to maximize opportunities for Xifaxan and Relistor to help our products reach full potential. Xifaxan and Relistor are integral to our gastrointestinal franchise which remains a core asset for future growth potential in the hands of Valeant," said Joseph C. Papa, chairman and chief executive officer. "With approximately 70% of IBS-D patients initially presenting with symptoms to a primary care physician, our dedicated PCP sales force will be better able to reach the patients in need of IBS-D treatment and in doing so will further advance our mission to improve people's lives with our healthcare products."

There are several implications.

First the stories that say Valeant is selling Salix are almost certainly false. These stories are responsible for the stock rising 30 percent recently.

Secondly it puts the acid to the idea that Mike Pearson (Valeant's former CEO) was good at cutting costs. As this story makes clear Salix had a Primary Care Sales Force when Valeant acquired it. However they were debating whether to keep it. (Obviously they gutted it and are now being forced to reinstate it.)

This happened all over Valeant. Lots of businesses are melting ice cubes where the sales force has been neutered or where drugs have had prices pushed up to levels that create umbrellas under which competitors will flourish.

Finally they can't sell Salix for anything like what they paid for it (and that was the single most obvious sale candidate). Other sale candidates will have bigger separation problems.

Debt outstanding is roughly cumulative acquisition cost. This won't wind down nicely.

Indeed bankruptcy looms. Late next year probably.

Long shareholders, by now you ought to be feeling sick. But let me offer a solution: opiates. Just drug yourself out so you don't feel the pain.

And if you get opiate-induced constipation Salix/Valeant can help you out. That is what Relistor is for.

And now a Primary Care Salesman will visit your doctor and explain the benefits. Mr Papa (Valeant's CEO) is making sure that happens.

Sure Valeant will charge your insurance company plenty for the drug. But it is for a good cause.


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