Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals has been an interesting stock to watch as of late, to say the least. It is arguable that, at the moment, it is one of the most heavily debated stocks in the biotechnology sector. Today, we’ll take a look at the debate from both the bearish and bullish sides of the equation, and I’ll let you in on why I believe VRX is a buy. So, let’s get right to it…
Trade smarter and make more money with Tradespoon!
The Bearish Argument On VRX
Before last year, there really wasn’t much of a bearish argument when it came to Valeant Pharmaceuticals. However, late last year, when Citron published a report about the company, the bears quickly came out to play.
You see, Citron’s investigation into VRX unearthed something that no one expected they would see. The company had been using its relationship with its biggest customer to falsify documents and make it seem as though they were doing better than they actually were. Of course, when the news broke, VRX tanked. For quite some time, the stock continued falling while the company scrambled to make changes.
The bears argue that Valeant Pharmaceuticals still has quite a long way to go before they recover. Considering the stigma surrounding the stock as a result of the Philidor Pharmacy scandal, the bears simply aren’t willing to take the risk associated with getting involved with the stock.
The Bullish Argument
When it comes to VRX, while there are plenty of bears, there are also plenty of bulls; and, while the bearish argument is valid, so, too, is the bullish argument. Here’s how the bulls see it…
First and foremost, it’s important to understand that the bulls don’t deny that the company was in the wrong. At the end of the day, the proof is in the pudding; there’s simply no denying it. However, they do argue that, since the scandal, we’ve seen quite a few changes, and the company is doing a great job of turning around. Here are some of the most important changes that we’ve seen:
- Philidor Cancellation – First and foremost, when the scandal became public knowledge, one of the first things that VRX did was cancel it’s relationship with Philidor. While this would cause massive declines in sales, it would also appease investors in the sense that the relationship could no longer be used to mislead them.
- New Management – Valeant Pharmaceuticals has also made several changes when it comes to management. Not only has the company brought a new CEO on board, they’ve brought in new members to the board of directors. This new management team is dedicated to making things right and ensuring that these types of issues never happen again.
- Walgreens – Shortly after announcing the cancellation of the agreement with Philidor, VRX made another big announcement. The company had signed an agreement with Walgreens under which the company would sell their products. With Walgreens being one of the largest pharmacies in the world, this was incredibly positive news.
Between everything mentioned above, the bulls see the company turning around. As a result, they see tremendous upside in VRX.
Why I Am With The Bulls
As with anyone else, I won’t deny that VRX did the wrong thing, and there’s no denying the fact that it’s going to take some time for investors to regain trust in the company. Nonetheless, there’s also no denying the fact that, since the scandal, we’ve seen nothing but good moves made by the company. To add more fuel to the bullish fire, the new CEO, Joseph Papa, recently made a rather large investment in the company, purchasing more shares. All in all, it may take some time for Valeant to recover. However, I do see incredible upside in the stock over the long run.
Don’t waste your time! Click here to find winning trades in minutes!
What Do You Think?
Where do you think VRX is headed and why? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of Wikipedia]