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Medicis Completes Acquisition - Previous Acquisition Sold at Huge Loss.

|Includes: Valeant Pharmaceuticals International, Inc. (VRX)

Medicis (NASDAQ: MRX), a $2.0 billion specialty pharmaceutical manufacturer, announced on Friday that it had completed its $455 million acquisition of Graceway Pharmaceuticals. Graceway, a manufacturer of skin treatments and asthma medication, had filed for bankruptcy in Sep-11. Reasons cited for the bankruptcy included generic competition for Aldara, the company’s top-selling product.

MRX has a short and seemingly underwhelming acquisition history. The company reported one acquisition, LipoSonix, in Jul-08 for $154 million plus milestone payments of up to an additional $150 million. LipoSonix, which was classified as a discontinued operation in Feb-11, was ultimately sold in Nov-11 for just $15 million plus certain contingent payments.

Overall, we have mixed feelings regarding the Graceway acquisition. While Graceway is an extension of the company’s core business, MRX's acquisition of LipoSonix was not successful, which raises the risk for the success of Graceway based on how we view the world. Additionally, the purchase represents a significant capital outlay when compared to MRX's $870 million of equity as of  30-Sep-11.

Here is MRX's press release on the Graceway acquisition.