It sells everything from cancer and neurology drugs to cold remedies and toenail fungal solutions.
"We have thousands of products around the world," said Michael Pearson, Valeant's CEO. "We are very diversified. We're like a little Johnson & Johnson (NYSE:JNJ). We have a consumer division. We have medical devices (contact lenses, aesthetic lasers, cataract surgical machines) and pharmaceuticals."
Since it merged with Canadian drug firm Biovail in 2010 and relocated from Southern California to Laval, Quebec, in Canada, Valeant has made over 100 acquisitions.
The change in corporate venue to Canada also meant that money earned and taxed overseas wouldn't be taxed again as it would be in the U.S.
Most of Valeant's acquisitions have been relatively small. But in addition to its merger with Biovail, three in particular were game changers.
The first was its $2.6 billion buy in 2012 of Medicis, which expanded its dermatology franchise. In 2013, it paid $8.7 billion for Bausch & Lomb, which made it a big player in eye care.
And in April, Valeant acquired Salix Pharmaceuticals for $15.8 billion. Salix's leading drug, Xifaxan, an antibiotic that treats bacterial infections such as E. coli in the intestine, quickly leaped to the head of Valeant's pack as its No. 1 selling product.
Even so, Xifaxan accounted for only 5% of Valeant's $2.7 billion in total revenue in the second quarter. But analysts from Canaccord Genuity expect Xifaxan to become Valeant's first $1 billion drug by next year, making up about 10% of sales.
"Xifaxan is off to a good start," Pearson said, noting that in May the U.S. Food and Drug Administration approved the drug for an additional indication, diarrhea-related irritable bowel syndrome. "That was a big positive."
Xifaxan is also used to fight loss of brain function in patients with liver failure as toxins build up in the blood.
Valeant's No. 3 best-selling product — the prostate-cancer drug Provenge — also came through an acquisition earlier this year, of assets of bankrupt biotech company Dendreon, in a deal valued at $415 million. Provenge sales in Q2 were tracking at an annual run rate of $300 million.
Total revenue in Q2 grew 34% over the earlier year to $2.7 billion. Earnings rose by the same percentage, to $2.56 per share.
The strengthening U.S. dollar over the last two years against currencies such as the Canadian dollar, Russian ruble and Japanese yen has increased the value of its U.S. business, Pearson says. He says that the U.S. accounts for around 70% of the company's revenue vs. 50% two years ago.
"We have also launched new products in the U.S., but the biggest shift is because of the foreign exchange," he said.
Valeant also closed on or agreed to buy eight other companies this year, including an agreement announced on July 17 to buy Amoun Pharmaceutical, the largest drugmaker in Egypt.
CEO Michael Pearson links some of Valeant Pharmaceuticals' strong Q2 results to "outstanding starts" for its Salix and Dendreon acquisitions. View Enlarged Image
China Market Awaits
The $800 million Amoun acquisition will further strengthen Valeant's presence in emerging markets. Some of its biggest such markets are in China, the Middle East and Mexico.
"You can expect that we will continue to make acquisitions. That is part of our strategy," Pearson said.
In the U.S., Valeant is eying companies involved in areas where it is already strong, such as gastrointestinal medicine, dermatology and ophthalmology, he says. "Outside the U.S., we tend to have a broad range of products."
But "larger and larger deals will be required to move the needle," noted analysts Gregg Gilbert and Greg Fraser in a July 23 research note for Deutsche Bank Securities, which nonetheless raised their estimates and price target based on higher-than-expected sales and gross margin in Q2.
"We like Valeant's efficient tax structure, diverse revenue base and lack of significant patent cliffs, but we are concerned that investors have come to expect highly accretive deals," they said.
Not all of Valeant's acquisition attempts have succeeded.
The most well-known failure was its $54 billion bid last year to buy Allergan (NYSE:AGN), the maker of Botox, in partnership with activist investor William Ackman's Pershing Square hedge fund. Allergan accepted a higher offer from Irish drug firm Actavis, for $66 billion.
And acquisitions don't drive all of the company's growth. So-called organic revenue — which excludes revenue from past-year acquisitions — grew more than 15% in Q2, the fourth straight quarter of 15%-plus such growth, Pearson noted in the Q2 report.
In that recent report, Valeant said to "expect same-store sales organic growth of (greater than) 10% for the second half of 2015."
Valeant's second biggest product by revenue, the anti-fungal toenail solution Jublia, was developed internally. Jublia sales in Q2 were tracking to an annual run rate of $450 million, no doubt getting a lift from TV ads, including a spot during the Super Bowl featuring tennis star John McEnroe.
In its Q2 report, Valeant raised its 2015 revenue forecast to $10.7-$11.1 billion, from $10.4-$10.6 billion previously. It also increased earnings guidance to $11.50-$11.80 per share, from $10.90-$11.20.
Analysts polled by Thomson Reuters expect earnings of $11.58, for a 39% year-over-year gain, on revenue of $10.9 billion, a 32% increase over the prior year.
Meanwhile, Valeant has a number of drugs in its pipeline, addressing areas such as eye health, postoperative pain and inflammation, and psoriasis.
"Valeant's existing pipeline includes a wide breadth of products, none of which are disproportionately large relative to total company revenue," noted Canaccord Genuity analysts in their research report.