Since touching a monthly low at around $11 a share, Valeant Pharmaceuticals (TSX: VRX) is winning shareholders. Its quarterly earnings report showed the company is on the mend. Expect VRX stock stabilizing from here and potentially returning more in the quarter ahead.
Since the end of Q1/2016, Valeant cut its debt by $6 billion. It already surpassed its goal of paying down $5 billion by next year, February 2018.
More recently, Valeant announced it would sell Sprout Pharmaceuticals, ending the disastrous Addyi business. The drug, which is a “male Viagra” is not an area of business strength for Valeant. By divesting itself from the women’s health market, Valeant may focus on its two core businesses: eye care and GI.
In Q3, Salix and B+L accounted for 77% of Valeant’s revenue. At that level, the company has room to grow its sales, improve on profitability and all the while continuing to shed non-core businesses.
Dermatology is still a headwind, where volumes declined. Though the GLUMETZA settlement hurt gross margin by 60 basis points, the company may report an improvement here in future quarters as it cut costs.
Valeant decreased G&A costs by 20%. Now that hiring is completed and retention costs stabilized, controlled spending should give profits a lift.
