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Valeant (VRX) Shares up on ValueAct's 5.2% Stake Increase

Zacks Equity Research

Shares of Valeant Pharmaceuticals VRX were up after investor ValueAct Capital management increased its stake in the company to 5.2%. 

The news boosted investors’ confidence in the beleaguered company which has been in the spotlight throughout 2016. The news comes right after the stock beat following Bill Ackman’s hedge fund, Pershing Square, selling its investment from the company. In an 8K filed by Valeant, it was stated that William A. Ackman and Stephen Fraidin will continue to be the company’s board of directors until the upcoming annual meeting but will not stand for re-election.

We note that the shares of Valeant have underperformed the Zacks classified Medical-Drugs industry in the last one year. The stock lost 58.5% as compared to the industry’s gain of 16.3%.

The company’s efforts to revive the business did not fetch any returns. Once an acquisition giant, Valeant was caught up in various controversies in 2016-price hike of specialty drugs, erroneous financial reporting and termination of contracts with Philidor Rx Services.  With its new CEO, Joseph C. Papa, Valeant started a rebuilding process in 2016. However, that was not enough.

The company recently reported fourth-quarter results which beat expectations but the guidance for 2017 was disappointing.

Valeant Pharmaceuticals International, Inc. Price and Consensus

Valeant Pharmaceuticals International, Inc. Price and Consensus | Valeant Pharmaceuticals International, Inc. Quote

The guidance for 2017 poses concerns about the company’s organic growth. Valeant witnessed an improvement in sales force turnover owing to some voluntary and involuntary changes. Moreover, generic competition of key drugs will continue to impact results. The company is facing generic completion of its neurology products while the dermatology segment is also facing weakness.

On Nov 8, 2016, Moody’s Investors Service downgraded the company’s credit rating to B3 from B2. Valeant’s recent efforts to restructure debt also didn’t go down well with investors.

It is going to be an uphill task henceforth for Valeant.

Zacks Rank & Key Picks

Valeant currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the health care sector include Heska Corp. HSKA, Anthera Pharmaceuticals, Inc. ANTH and Retrophin, Inc. RTRX. All the three stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Heska’s earnings estimates increased from $1.53 to $1.65 for 2017 and from $1.90 to $2.01 for 2018 over the last 30 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 291.54%. Its share price increased 33.8% year to date.

Anthera’s loss estimates narrowed from $1.49 to $0.98 for 2017 over the last 60 days.

Retrophin’s loss estimates narrowed from 85 cents 72 cents for 2017 and from 67 cents to 53 cents for 2018 over the last 30 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 80.55%.

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Anthera Pharmaceuticals, Inc. (ANTH): Free Stock Analysis Report
 
Retrophin, Inc. (RTRX): Free Stock Analysis Report
 
Heska Corporation (HSKA): Free Stock Analysis Report
 
Valeant Pharmaceuticals International, Inc. (VRX): Free Stock Analysis Report
 
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