The series was prompted by their biggest attempted acquisition to date - an unsolicited and ultimately hostile bid for Allergan - the maker of Botox.
If you have not been following you can review the series here: Part I, Part II, Part III, Part IIIa, Part IV, Part V, Part VI, Part VII, Part VIII and Part IX.
I guess several people have asked either analysts or the company because explanations are coming out.
JPMorgan - in a note dated 6 August 2014 gave an explanation. I quote:
Management provided additional clarity on aesthetic injectables divestment.
The EPS impact from the divestiture of Valeant’s injectable franchise has been a key point of controversy since 2Q results last week. Although the injectable franchise generated $280mm in sales in 2013, Valeant had doubled its sales force on these products in January and forecasted sales to increase to $400mm in 2014 (largely back half-weighted as the sales force ramped). Further, Valeant opted to retain much of its sales infrastructure after the divestiture and, as a result, incremental margins on 2H divested revenues were extremely high.
It would be a good explanation. The only problem is that this explanation is in radical disagreement with statements by the management of Valeant.
Humberto Antunes , CEO of Galderma, has embraced our commercial team and I know he will continue our efforts to build strong relationships with the healthcare leaders in this industry.
As expected, the aesthetics business deteriorated in Q2. The physicians were confused as to what products we wanted them to buy: our legacy Medicis products or our soon-to-have Allergan products. The uncertain status of our MVP Program also created concern for the doctors. Our reps and management were focused on pleasing their new owners and holding back sales until they worked for the new company, and our competitors were discounting heavily and disproportionately trying to take a temporary share to demonstrate weakness in our business.
As a result, our sales dropped approximately 40% in Q2. Fortunately, these assets are now safely in Galderma's hands, and we can now focus on the rest of our business.
Galderma's management are also clear that most of the sales infrastructure went with the products to Galderma. Galderma's press release states:
At Galderma people come first. We are thrilled to take on board the experienced teams from Valeant Aesthetics and, more than ever, our intent is to preserve the quality of the long-lasting relationship built with doctors.
The JPMorgan note quoted above explicitly states that the sales force stayed with Valeant. Michael Pearson however has repeatedly stated the sales infrastructure went with the new owners.
Just for kicks I have examined many profiles on LinkedIn.com - checking the movement with functions with the asset sale. It is pretty clear - the sales infrastructure went with the asset.
I gave an early draft of this blog post to Chris Schott, Jessica Fye, Wendy Lin and Dana Flanders (the JPMorgan analysts) and expected them to come out with an explanation consistent with the statements of Valeant and Galderma management (or for that matter consistent with easily obtained data on LinkedIn).