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Valeant, as a platform company, does not offer any unique drug discovery capabilities or any high-potential drugs that would benefit from the sales force of a larger firm.
To make matters worse, Valeant's EBITDA is inflated by the company's lack of R&D investment.
Valeant is uniquely unsuited as an acquisition target because of its lack of growth and poor R&D investment.
Even if Valeant's stock price was zero, the company would still be overvalued on the EV/EBITDA metric.
Valeant's growth rate is negative, and an acquirer who bought Valeant for a large EBITDA multiple may never break even unless they increased drug prices dramatically.
And this gets even worse when you consider the time value of money, opportunity cost of money, and the WACC of the potential acquirer in question.
When people claim a 14x EBITDA multiple is "normal" for pharmaceutical acquisitions, they are comparing apples to oranges when it comes to Valeant. If an asset is purchased for this price, it would take 14 years to break even assuming EBITDA stays flat.The only reason pharmaceutical assets can sell for this price, and often higher, is because of rapid growth, priceless R&D investment, and operational synergies.Most financial managers don't buy cash flow at 14x EBITDA unless they are confident they can grow the cash flow significantly before the LOE date or increase the EBITDA through operational synergies.The possibility that it will generate enough cash to pay down the debt through methods other than self-liquidation.Let's do a rough calculation of Valeant's cash flow for principal debt pay down assuming it will not issue more shares or sell assets: Basically, EBITDA less interest expense.
R&D is calculated out of EBITDA because it is a cost of continuing operations.