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Earnings Beat at Valeant, Guides Up

Zacks Equity Research

Valeant Pharmaceuticals International’s (VRX) second-quarter 2012 earnings of $1.02 per share (excluding special items but including stock-based compensation expense) was above the Zacks Consensus Estimate of $1.00 and the year-ago earnings of 68 cents per share.

Revenues for the quarter were $820.1 million, up 34.6% from the year-ago period. The year-over-year improvement in revenues was primarily attributable to higher product sales. Total revenues included a milestone payment of $45 million from GlaxoSmithKline (GSK) related to Potiga (ezogabine). Revenues were below the Zacks Consensus Estimate of $830 million.

Quarterly Highlights

Product sales amounted to $748.7 million (on a reported basis) during the second quarter, up 41.3%. Strong sales in the US Dermatology (up 164.6% to $210.6 million), Canada/Australia (up 42.3% to $117.4 million) and the Emerging Markets (up 111.7% to $249 million) segments contributed to the increase. Organically, (excluding the impact of acquisitions and foreign exchange), revenues grew 10% from the year-ago quarter.

Research & development (R&D) expenses fell 0.3% to $17.7 million. Selling, general & administrative (SG&A) expenses for the second quarter increased 23.9% to $185.4 million. While R&D accounted for approximately 2% of revenue, SG&A accounted for 22%.

2012 Guidance

Valeant raised its earnings guidance for 2012. Cash earnings are now expected in the range of $4.55–$4.75 per share (previous guidance: $4.45–$4.70 per share). Excluding one-time items, cash earnings are expected to be between $4.18 and $4.38 per share.

Valeant continues to expect total revenue in the range of $3.4 billion to $3.6 billion. The Zacks Consensus Estimate hinted at 2012 earnings of $4.44 per share on revenues of $3.5 billion.


We currently have a Neutral long-term recommendation on Valeant. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

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