Valeant Pharmaceuticals (VRX) Stock: Don’t Miss This Gravy Train

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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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1 COMMENT

  1. Hi Joshua, although I agree with your thesis, I find your presentation/writing style amateur sounding, introducing the use of too much emotion (and not effectively). Investors aren’t looking for entertainment — their looking for integrity and trustworthiness. I don’t believe your writing style promotes this type of confidence.

    I’d like to hear things like “all of the bad news has been priced in, along with the impact of the long-trend of negative sentiments”, and state that we expect to see a rise based solely upon the natural relief that comes when this “negative sentiment trend” wears off. And then after that, more rise, as VRX fixes things (add details).

    And then bring up the KEY point that Papa announced upfront that he would “under promise and over deliver”, which means his Q1 guidance was kitchen-sinked, and that in all likelihood, moving forward, VRX will start to beat guidance, which is a key step in reversing the impact of the negative sentiments. Once the downtrend is officially stopped, the uptrend can begin.

    Bring up the details of what was kitchen-sinked — for example, the guidance doesn’t account for Walgreens being fixed, or Xifaxan re-energized, or the introduction of any new drugs. Any good news at all, therefore, will aid VRX in beating the sandbagged guidance of Q1.

    Since you seem to be re-posting essentially the same texts again, and again, I sure would like to see more “meat” here, more good points, and less emotion (about how it made you feel, or how you were surprised, etc).

    Otherwise, I’m a fan of your thesis here.

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