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Can Valeant (VRX) Turn Around on Rebuilding Initiatives?

Zacks Equity Research

Shares of Valeant Pharmaceuticals International Inc. VRX have rallied 7.2% year to date compared with the industry’s gain of 2.4%.



We note that the stock has lost 85.2% last year. After a tumultuous period, Valeant started a rebuilding process with CEO, Joseph C. Papa. Even though it is still early to comment on the rebuilding process, but the company’s efforts to sell non-core assets and clear debt is commendable and should bode well in the upcoming quarters.

Valeant sold its equity interests in Dendreon Pharmaceuticals, Inc. to the China-based Sanpower Group Co. Ltd. Valeant has also announced plans to divest Obagi. The company also sold iNova Pharmaceuticals for $930 million.

The company is also divesting Sprout Pharmaceuticals and ADDYI businesses. As of Nov 7, 2017, the company lowered debt by approximately $6 billion since the end of first-quarter 2016. The divestiture of non-core assets should help the company streamline its product portfolio and focus better on core areas of dermatology and clear debt as well.

Meanwhile, the approval of new drugs is also likely to boost the company’s portfolio. The FDA has approved the Biologics License Application for Siliq (brodalumab) injection, for subcutaneous use for patients with moderate-to-severe plaque psoriasis. The company had an agreement with AstraZeneca plc AZN for Siliq but the deal has been amended. Valeant’s NDA for Plenvu has been accepted by the FDA. A low volume (1L) polyethylene glycol-based bowel preparation, Plenvu, has been developed for bowel cleansing, with added focus on the ascending colon. This, in turn, is expected to enhance bowel cleansing and the overall experience relating to colonoscopy. The drug, upon approval, will offer the lowest solution for an FDA-approved bowel cleanser in the market. The drug will have an edge over high preparation volumes which sometimes can be a deterrent in patients completing their regimen.

The company also received clearance for the Thermage FLX System to non-invasively smooth skin on the face, eyes and body.  The FDA also approved Vyzulta for open-angle glaucoma.

On the other hand, uptake of Xifaxan and the launch of Relistor tablets drove prescription growth by 61% in the third quarter. Meanwhile, pricing in the dermatology business is beginning to stabilize. The Bausch + Lomb International segment and Salix businesses are doing well.

Consequently, we believe things are definitely looking up for Valeant.

Zacks Rank & Key Picks

Valeant currently carries a Zacks Rank #3 (Hold).

Some better-ranked health care stocks in the same space are Ligand Pharmaceuticals Incorporated LGND and Corcept Therapeutics Incorporated CORT carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ligand’s earnings per share estimates have moved up from $3.68 to $3.70 for 2018 over the last 60 days. The company delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 8.22%. The share price of the company has increased 28.4% year to date.

Corcept’s earnings per share estimates have moved up from 45 cents to 47 cents for 2017 and from 77 cents to 88 cents for 2018 over the last 60 days. The company delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 14.32%. The share price of the company has increased 135.4% year to date.

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Astrazeneca PLC (AZN) : Free Stock Analysis Report
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