Valeant iNova Bids: The Disappointment Won't End

(Bloomberg Gadfly) -- It's as if it was all a dream -- as if Valeant Pharmaceuticals International Inc. never tied up with Biovail, tax-inverted to Canada, and went on a massive, years-long acquisition spree at all. 

With Wednesday's 6.5 percent share-price decline -- prompted by a report of disappointing bids for Valeant's Australian iNova business, possibly thwarting a sale -- Valeant fell below the apparently meaningful $10 threshold. Valeant shares haven't been this cheap since 2008, well before the 2010 Biovail deal.

All that's left of this former specialty pharma giant is a collection of shaky assets no one wants to buy -- and the massive $30 billion debt pile used to acquire them. 

The iNova news really shouldn't have surprised investors, who seem to nurse unrealistic expectations about Valeant's ability to raise cash to pay down that debt pile. A mere rumor of a new iNova bid sent Valeant shares up 4.6 percent on March 29.

But Valeant has all but warned it's having trouble with its fire sale, by watering down its rhetoric about its once-trumpeted target of $8 billion in asset sales , and by doing a massive debt restructuring in March to push its day of creditor reckoning off a bit further.

Below is an updated version of a chart I first ran

Since those January sales, nothing has happened but this iNova failure and efforts to buy time from creditors. Reported low bids for iNova drive home a long-held assumption that Valeant is being lowballed at every turn by buyers who know it's desperate, and that future asset sales will come at a large discount, if they come at all.

It's time for Valeant investors to stop believing in this fantasy of it selling enough assets to get its debt under control. That is highly unlikely to happen.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

1. Valeant CEO Joe Papa on the company's earnings call on February "The other thing we talked about is that we identified what we referred to as billion of revenue for what I would refer to as non-core. We think that those can generate somewhere in the billion of proceeds. But I think really, we're not trying to suggest every one of those is going to get sold. We're just really trying to use that as an illustrative opportunity to identify non-core asset sales that we think are going to help us to pay down and reach this billion of debt repayment."

To contact the author of this story: Max Nisen in New York at mnisen@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.