Shares of Valeant Pharmaceuticals International, Inc. (VRX) reached a 52-week high of $118.25 during the course of the trading session on Dec 31, 2013. The Canadian company, however, closed the trading session at $117.4.
With 96.4% of robust year-to-date return and a long-term expected earnings growth rate of 25.5%, this pharma stock seems to be an attractive pick for long-term investors.
The specialty pharmaceutical Zacks Rank #2 (Buy) company has a market cap of $39.2 billion as on Dec 31, 2013. The average trading volume for the last three months was about 932,321 shares.
Valeant is a multinational specialty pharmaceutical company engaged in the development, manufacture, and marketing of various pharmaceutical products, particularly in the areas of neurology, dermatology and branded generics.
The company aims to expand its business through acquisitions. This year Valeant has acquired Bausch+Lomb in Aug 2013, Obagi Medical Products, Inc. in Apr 2013, some assets of Eisai Inc. in Feb 2013 and Natur Produkt International also in Feb 2013.
Valeant acquired Bausch+Lomb to strengthen its ophthalmology portfolio. The acquisition will enable Valeant to penetrate into the growing eye health market fueled by an aging patient population, an increased rate of diabetes, and increasing demand from the emerging markets.
Last month, Valeant entered into a definitive agreement to acquire all of the outstanding common stock of Solta Medical, Inc. (SLTM) for $2.92 per share in cash or $250 million. This acquisition is expected to close in the first quarter of 2014. Valeant expects this acquisition to be immediately accretive to its bottom line.
Dermatology is the key focus area for Valeant and it continues to develop its dermatology portfolio. Valeant received approval from the US Food and Drug Administration (:FDA) for Luzu cream, 1% in Nov 2013 for the topical treatment of a variety of skin diseases such as athlete's foot, jock itch (tinea cruris), and ringworm (tinea corporis). In Oct 2013, Valeant received approval for its topical triazole antifungal solution Jublia in Canada.
Premium Valuation Justified
On a price-to-sales basis, Valeant is trading at 8.3x, reflecting a huge premium of 163.5% compared with the peer group average of 3.15x. On a price-to-book basis, the stock is also trading at a premium to the peer group average. Given the company’s strong fundamentals, the premium valuation is justified.
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