The analysts, John Newman, James Tumbrink and Anthony Cecchini, said combing the two companies would produce few synergies, and is unlikely for several reasons.
Among those cited was the potential for near-term revenue from Salix's best-selling drug Xifaxan to slow; the fact that approval of Xifaxan for treatment of Irritable Bowel Syndrome is likely to require additional clinical data; questionable market potential for another Salix drug, Relistor; and because the analysts believe Salix does not fit Valeant's model for acquisitions.
"In its transactions with Biovail and PharmaSwiss, and its previously proposed acquisition of Cephalon, Valeant noted on its recent conference call that it considered those companies' international operations and potential corporate synergies as being important for a transaction," the Citadel analysts wrote.
"While some synergies would likely be obtained with Salix, its U.S.-focused gastrointestinal product line does not appear synergistic with VRX's U.S.-based CNS, dermatology, generic drug, and consumer-product-focused efforts, in our view."
Salix was mentioned as a potential Valeant acquisition target by Gary Nachman, an analyst with Susquehanna International Group in New York.