Valeant Pharmaceuticals (VRX) Continues Falling After Strong Earnings Report

Valeant Pharmaceuticals Intl Inc (NYSE: VRX)

Valeant Pharmaceuticals has had a rough time in the market over the past few trading sessions, and that hard time is continuing today. Even after producing solid earnings, the company can’t seem to get past the major blow that was dealt last week. Today, we’ll talk about the big hit VRX took, what we saw from earnings, and what we can expect to see from the stock moving forward. So, let’s get right to it…

VRX Struggles With A Federal Investigation

As of late, there has been quite a bit of a debate about the pricing of medications. We’ve seen several cases in which the prices of medications were increased dramatically without a reasonable explanation except, of course, the fact that pharmaceutical companies want to make more money. In fact, this issue seems to be one of the leading issues on presidential candidate Hillary Clinton’s mind. You all likely know the story so I will spare you the details. Nonetheless, Valeant Pharmaceuticals is now tied into this heated debate. Last week, VRX announced that it had been given subpoenas from the United States Attorney’s Offices in both Massachusetts and the Southern District of New York.

Upon reading the subpoenas, VRX found that Federal investigators are looking for details with regard to the pricing information given to the Centers for Medicare and Medicaid Services, distribution of the company’s products, and the financial support that it gives to patients in financial need. VRX has recently come under fire with regard to the pricing of its flagship treatments, Isuprel and Nitropress. In a statement, VRX CEO J. Michael Pearson announced that he believes that the company has done nothing wrong and will gladly work with Federal Investigators in this case. Here’s what he had to say…

We remain committed to assisting eligible patients who need our products, and we will be working with the appropriate groups to submit the requested documents and plan to cooperate with inquires.”

VRX Releases Earnings

Valeant Pharmaceuticals and bullish investors hoped that a solid earnings report would pull the stock out of the downtrend we’ve been seeing since the federal subpoena was received. While the earnings report released from the company was positive, the stock doesn’t seem to be reacting in a positive way. Here’s what we saw from earnings:

  • Q3 Earnings Per Share – Earnings per share came in at $0.14.

  • Revenue – Revenue for Q3 came in at $2.79 billion.

  • Guidance – For the fourth quarter, VRX is expecting to reach an EPS of between $4.00 and $4.20 per share. For the entire year, VRX is expecting to report EPS at between $11.67 and $11.87 per share.

It was clear that CEO, J. Michael Pearson was happy with the results. Here’s what he had to say…

Today, we reported yet another consecutive quarter of strong financial results that exceeded expectations… I am incredibly proud of the hard work and effort put forth by Valeant’s employees around the world. I would also like to thank all the doctors who prescribe our products and the patients who use them. We will be discussing our outperformance on our conference call later today, as well as addressing the most frequently asked questions we have been hearing from our shareholders. With our strong product portfolio and growth prospects, we feel very confident in our future outlook and we are reaffirming our $7.5 billion EBITDA floor for 2016.”

Again, while earnings were positive, VRX investors didn’t react in the positive way we would generally expect. Currently (10:54), VRX is trading at $166.35 per share after a loss of 6.31% on the day as the result of looming fear with regard to the federal investigation into the companies practices.

What We Can Expect To See Moving Forward

First off, I’d like to say that I have faith in the practices at VRX. I don’t believe that they have done anything wrong and I believe that further investigation into the company will prove that. With that said, I am expecting to see continued declines and flat movement from the company until the federal investigators come to the same conclusion. Nonetheless, I also have to say that VRX is a great company with a strong earnings history, strong products, and incredibly strong management. With that said, I’m expecting to see great movement in the long run.

What Do You Think?

Where do you think VRX is headed moving forward and why? Let us know in the comments below!

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