Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals is starting today’s trading session in the green. However, I have to say that I’m not surprised. Since the Philidor scandal, there has been quite a bit of fear revolving around the stock. Nonetheless, the scandal is over and it’s time to invest again. Today, we’ll talk about the scandal, why we’re seeing gains now, and why VRX is going to be a gravy train moving forward. So, let’s get right to it…
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The Scandal That Sent VRX Down
If you’ve been following Valeant Pharmaceuticals over the past several months, chances are that you know about the scandal, so,I’m not going to spend too much time explaining it. Late last year, it was uncovered by a firm known as Citron that the company had been using its relationship with its largest customer in order to mislead investors.
Essentially, what VRX was doing was saying that it was making more money from the Philidor agreement than it was actually making. In fact, the total damage here came to about $50 million. That’s no chump change. As a result, the company was forced to make some big changes,and the stock fell like a brick dropped from the Empire State Building.
Why Investors Are Bullish Again
When this scandal came to light, I have to say that I didn’t want to believe what I was seeing. However, the proof was in the pudding. VRX was lying to its investors. Nonetheless, investors seem to be taking a bullish approach on the stock once again, and for good reason. The truth is that the company has made several key changes since the scandal, positioning itself for HONEST growth.
You see, one of the first things that the company did was cancel its agreement with Philidor. While this caused quite a bit of pain with regard to sales numbers, the agreement had to be canceled to appease investors. Nonetheless, shortly after the cancellation of the agreement, Valeant Pharmaceuticals signed an agreement with Walgreens. Under the agreement, Walgreens would start selling the company’s products. This is great news, as Walgreens is one of the biggest pharmacies in the United States. Now, the company is working hard to find other companies to partner with when it comes to the sale of their products.
However, sales wasn’t the only place that VRX decided to make big changes. Another area where big changes were made was management. Shortly after the scandal, the company brought on two members to its board of directors. One of them was Activist Investor Bill Ackman.
Ackman saw a need for a CEO shakeup. As a result, he promised investors two things. First, there would be a new CEO coming to VRX. Second, he promised that finding the new CEO was not going to take long. These promises didn’t go unmet. Shortly after the promises were made, J. Michael Pearson was stepping down while Joseph Papa, a well-respected member of the pharmaceutical industry, took charge.
With all of these changes now in place, investors are starting to see the light at the end of the tunnel, and that light is a bright one. As a result, we’re finally starting to see upward movement on the stock once again.
What We Can Expect To See Moving Forward
At this point, Valeant Pharmaceuticals has completely updated its business. It has changed management, changed contracts, and changed how it does things. As a result, a scandal like the Philidor scandal isn’t likely to happen again.
Today, VRX is back to normal, but a better normal. They still have the same products that excited investors, and they now have an agreement with Walgreens. Considering the changes, the stock is currently incredibly undervalued. As a result, I’m expecting this thing to morph into a gravy train that generates profits for all involved!
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What Do You Think?
Where do you think VRX is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
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