Valeant Pharmaceuticals wants to increase sales of Cold-FX by launching the over-the-counter remedy in the United States and globally if its latest friendly takeover bid is successful, chief executive Michael Pearson said Monday.
Valeant sweetened its offer to 85 cents per share of Afexa Life Sciences (TSX:FXA)valuing the Edmonton-based maker of Cold-FX at almost $88 million, assuming 103 million shares outstanding.
"Cold-FX is obviously the driver," Pearson said in an interview.
"What we believe we can do is take this product, which is already well established in Canada, and establish it in other markets which will expand that growth," Pearson said.
The Mississauga-based company, formerly known as Biovail, had previously offered 71 cents per share cash or $76 million for Afexa, but increased its offer Monday after rival Paladin Labs raised its hostile bid to 81 cents per share on the weekend.
The public market price rose to 86 cents per share at the Toronto Stock Exchange on Monday, suggesting investors expect the bidding to go even higher.
"Whoever bids the most in the end is going to get this company, I think," Pearson said, not ruling out a further bid.
Paladin (TSX:PLB), which owns about 15 per cent of Afexa, couldn't be reached for comment on Monday. Paladin shares gained 61 cents to close at $37.97 on the Toronto Stock Exchange on Monday.
Olympic figure skating champion Joannie Rochette, and Olympic speed skating and cycling medallist Clara Hughes are among the high-profile athletes who promote Cold-FX, which contains North American ginseng. NHL hockey commentator Don Cherry also promotes it.
Pearson said if Valeant is the successful bidder, it also is looking to sell Cold-FX in Australia, Latin America and Central Europe, either under its current name or under a local brand name.
Valeant already has a number of over-the-counter products such as moisturizer and skin care and acne treatments in countries such as the U.S., Mexico and Australia, he said.
"We have an ability to grow this brand because of our international footprint."
Pearson said Valeant's over-the-counter, non-prescription products are expected to bring in about $750 million in revenues, about 25 per cent of all of its revenues.
Pearson noted that Afexa has just launched Coldsore-FX and is looking at developing Cold-FX for children.
He said Cold-FX will continue to grow in the mid-to-single digits in Canada but "it's not what it could achieve if we took it internationally."
"We know that this company is worth more to us than it is to Paladin because of our global footprint and our larger Canadian operations."
Afexa chairman Bill White said Afexa is evaluating the offers.
"We are pleased with the potential to obtain higher values for the company," White said in a statement.
Desjardins analyst Pooya Hemami said he anticipates that Paladin will determine its next move regarding Afexa in the coming days.
"However, Valeant's quick and decisive response to Paladin's latest bid suggests to us that it is also highly interested in the Afexa assets, and that it could seek to outbid a potential increased offer from Paladin," Hemami wrote in a research note.
Hemami noted that Paladin holds about 15.4 million shares of Afexa that were acquired at an average price of 52 cents a share and Paladin would record a gross trading profit of about C$5 million if Valeant's updated bid is ultimately successful.
But he also said that Paladin could potentially raise its bid to between 90 cents and $1 per share.
Valeant is a multi-national specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics.
Paladin has also said that Afexa's Cold-FX will add to its sales of non-prescription products. The Montreal company has nine non-prescription medications including children's fever reducer Tempra, teething product Anbesol, anti-diarrhoea relief Kaopectate, the sleep aid Unisom and the emergency contraceptive Plan B, but it doesn't currently have any anti-cold remedies.
Valeant shares closed at $40.16, up 80 cents, on the Toronto Stock Exchange.