Set to report quarterly earnings on Feb 6 before the market closes, Valeant Pharmaceuticals International, Inc. (NYSE: VRX) is trading as if the company will beat estimates and raise its guidance. Even if that does not happen, the stock should hold on to its nearly two-fold return from yearly lows.
Valeant trades at a P/E of around six times. Its competitor, generic drug giant Teva Pharmaceuticals (TEVA), is also out-performing the biotech sector after rising over 100% from yearly lows. Both companies have cut costs and laid out a debt lowering strategy. Valeant is ahead with its turnaround plan: it refinanced its debt and pushed out maturities for its short-term debt. In its presentation, Valeant said the turnaround and transformation in 2018 will lead to attractive future growth.
Valeant is launching new products and seeking meaningful opportunities. The global market accounts for 72% of the company’s revenue. Through Bausch+Lomb, the company will carry out its international growth.
For 3Q17, Valeant expects organic growth of 6%. B+L’s key products are: 31% global consumer (includes Lumify, renu multi-purpose solutions) and 27% International, which comprises of Tiazac XC and Jublia, among other things.
Takeaway
Valeant’s upcoming quarter should hold no surprises. A best case scenario is that both B+L and Salix report revenue growth. A higher revenue revision is possible but not needed to justify the rally in VRX stock.
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