Valeant Pharmaceuticals (VRX) Stock: Gains On Coming

Valeant Pharmaceuticals Intl Inc (NYSE: VRX)

Valeant Pharmaceuticals has been an incredibly interesting stock to follow for nearly a year now. Late last year, news surfaced that the company had misled its investors using a relationship with its biggest customer. Since then, the stock has declined dramatically. However, the company has made several changes to improve its business and appease investors. Now, there’s a big conversation surrounding whether or not the stock will recover. Today, we’ll talk about the scandal that led to the declines, what we’ve seen from the company since, and why I believe that VRX will likely soar in the long run.

The Scandal That Started It All

For quite some time, VRX had a relationship with a pharmacy known as Philidor. This pharmacy just so happened to be the company’s largest customer, generating massive amounts of sales. However, the actual sales generated weren’t enough for Valeant. Instead of simply reporting the numbers as is, the company padded the numbers, misleading investors to believe that more money was being made than the actual sales would have allowed for.

This could have stayed under wraps for quite some time. However, late last year, there were several questions surrounding VRX and their pricing practices. As a result, the government launched an investigation into the company. Of course, when government investigations are going on, analysts want to investigate as well. This is where Citron comes in.

An analyst firm known as Citron decided to launch their own independent investigation into VRX. During their investigation, they found the misleading statements made by Valeant, and the relationship with Philidor that allowed the scandal to happen. Soon, Citron published a report, making the scandal public and calling Valeant the Enron of the pharmaceutical industry.

VRX Has Made Big Changes Since The Scandal

Since the scandal, VRX has been forced to make several changes to the way it does things. After all, the old way doesn’t work if it allows for the misleading of investors. So, the changes started with a cancellation of he agreement with Philidor, the agreement that made the scandal possible.

Shortly after announcing that the company had cut ties with Philidor, Valeant announced something new. The company would be signing an agreement with Walgreens under which Walgreens would start to carry their products. This would help with the amount of sales lost due to the Philidor cancellation.

Finally, VRX has also made several changes to management. First and foremost, the company replaced the CEO, J. Michael Pearson, with a well respected member of the Pharmaceuticals industry, Joseph Papa. On top of that, the company has also added two members to its Board of Directors – one being Activist Investor Bill Ackman.

Why I Believe The Stock Will Climb From Here

There’s no denying the fact that Valeant Pharmaceuticals was in the wrong when it comes to the Philidor scandal. However, that doesn’t mean that the company is dead in the water. VRX has fallen by far more than 70% at this point, but has not lost nearly that much in revenue nor earnings. While it may take some time to regain investor trust, with the changes the company has made, things are turning positive in a big way. So, in the long run, buying now will likely lead to big gains.

What Do You Think?

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

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1 thought on “Valeant Pharmaceuticals (VRX) Stock: Gains On Coming”

  1. Awesome article, spot on.

    I find it interesting that most media outlets continue to paint a doomsday outlook for VRX, but use half-truths to support their bearish sentiments (e.g. like Jim Cramer falsely declaring the Walgreens deal to be unprofitable, when in truth, only *some* of the prescriptions sold through Walgreens were losing money, not the whole deal).

    Additionally, lying Bears are declaring VRX as “up against a wall; forced to sell assets”, which is also totally untrue, being that they’ve only got $230M in debt left required to pay this year, yet they are planning to pay off $1.7B, well above the requirement.

    When Papa said he would surely “consider” offers for core assets, the Bear authors interpreted this as “an about face Fire Sale” as though VRX is pursuing the sale of core assets. In truth, his comment simply means that “for the right price, anything is for sale” (e.g. an offer of $40B for B+L would surely be accepted by Papa and shareholders).

    And finally, Bears ignore the known fact that Papa sandbagged (aka kitched-sinked) his 2016 guidance, as was expected, so that he could “under promise, and over deliver” just as he declared. Bears like to treat his 2016 guidance as yet “another reduction in guidance” as though it is a trend that must be continued. But in this case, with a new CEO, publishing guidance below *actual* expectations is how it’s done. Therefore, we should expect a high probability moving forward, for VRX to beat it’s guidance, not to lower it more.

    Fixing the Walgreens deal is a no-brainer. It’s a new deal, with a hiccup. New deals always have hiccups at the start, and resolving these hiccups are no-brainers. Papa would have to be inept to not be able to fix these issues quickly. I predict that we’ll see VRX announcing that Walgreens is “fixed” before the end of summer, and the VRX stock price will spike up from there.

    When I see the Bears forced to use deception and lies to support their conclusions; it’s a sign that the turnaround is about to happen. All it takes now is for this haze of deception/fear/lies to rise, and reveal the truth, which is that VRX is still a healthy profitable company with $10B+ of revenue, a high profit margin, and plenty of cash/profit to service it’s debt load.

    Hold on to your shares, or buy more, and ignore the lying mainstream media. It won’t be long before their haze of lies and fear rises, and reveals the underlying strength/health of VRX.

    I wouldn’t be surprised if short-term momentum carries the price to $20, or high teens, but that dip will be very short-lived before it returns to higher than $30.


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