Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced second quarter 2016 financial results.
“We continue to make progress towards stabilizing the organization,” said Joseph C. Papa, chairman and chief executive officer. “We are also announcing a new strategic direction for Valeant today, which, at its heart has a mission to improve patients’ lives, and will involve reorganizing our company and reporting segments. I am continuously encouraged by the commitment of our employees who work hard daily, rebuilding our relationships with prescribers, patients and payors, and regaining the trust of our debt holders and shareholders. Although it will take time to implement and execute our turnaround plan, I am confident that we will show progress in the coming quarters.”
Total revenues decreased 11% to $2.42 billion in the second quarter of 2016 as compared to $2.73 billion in the second quarter of 2015, driven primarily by a decline in product sales revenues from our existing business, as well as negative foreign currency exchange impact, partially offset by incremental product sales revenues from acquisitions completed in 2015.
In the Developed Markets segment, revenues declined 14%, driven mainly by a decline in product sales revenue from our existing business, primarily as a result of lower average realized prices which were in turn impacted by higher managed care rebates, lower price appreciation credits, our fulfillment agreement with Walgreens, and higher group purchasing organization (GPO) rebates. These factors were partially offset by an increase in contribution from acquisitions completed in 2015, primarily from Salix Pharmaceuticals, Ltd. and certain assets of Dendreon Corporation.
In the Emerging Markets segment, revenues were flat as compared to the second quarter of 2015, primarily due to a small decline in the existing business and negative foreign currency exchange impact, which were partially offset by incremental product sales revenue from acquisitions completed in 2015.
Cost of goods sold were $647 million in the second quarter of 2016 as compared to $670 million in the second quarter of 2015, a decrease of 3% primarily due to a decline in sales volumes, partially offset by increased sales from acquisitions completed in 2015, primarily of Salix and Amoun Pharmaceutical Company S.A.E.
Selling, general and administrative expenses (“SG&A”) were $672 million in the second quarter of 2016, as compared to $686 million in the second quarter of 2015. As a percentage of revenue, SG&A was 28% in the second quarter of 2016, as compared to 25% in the second quarter of 2015.
Research and development (“R&D”) expenses were $124 million in the second quarter of 2016 as compared to $81 million in the second quarter of 2015, primarily due to the development programs related to the Company’s dermatology product portfolio, as well as spending on brodalumab and programs acquired in the Salix acquisition.
Net Income (Loss)
Net loss in the second quarter of 2016 was $302 million as compared to a net loss of $53 million in the second quarter of 2015. Adjusted net income (non-GAAP) in the second quarter of 2016 was$488 million as compared to $751 million in the second quarter of 2015.
Cash flow from operations was $448 million in the second quarter of 2016 as compared to $411 million in the second quarter of 2015, an increase of 9% over the same period in 2015.
We have taken steps to streamline our portfolio in the second quarter. We have sold, or agreed to sell, the brodalumab EU rights, Synergetics USA OEM business, and Ruconest® for a total combined upfront payment of $181 million and additional consideration up to $329 million for achieving specific approval and sales milestones.
Specific to Ruconest, today the Company entered into a definitive agreement to divest all North American commercialization rights to Ruconest (recombinant human C1 esterase inhibitor) to Pharming Group N.V. (“Pharming”). Under the terms of the agreement, Pharming will pay Valeant aggregate consideration of up to $125 million, including an upfront fee of $60 million payable upon closing and certain sales-based milestone payments of up to $65 million. The transaction is subject to customary closing conditions, in addition to Pharming obtaining certain financing. Ruconest was classified as held for sale as of June 30, 2016 and an impairment loss of $199 million was recorded in the second quarter of 2016.
The Company is reconfirming its full year 2016 guidance. Total revenue is expected to be in the range of $9.9 – $10.1 billion. Adjusted EPS (non-GAAP) is expected to be in the range of $6.60 -$7.00. Adjusted EBITDA (non-GAAP) is expected to be in the range of $4.80 – $4.95 billion. (Original Source)
Shares of Valeant are up over 6% to $23.86 in pre-market trading Tuesday. VRX has a 1-year high of $252.51 and a 1-year low of $18.55. The stock’s 50-day moving average is $22.18 and its 200-day moving average is $41.42.
On the ratings front, VRX has been the subject of a number of recent research reports. In a report released yesterday, Canaccord Genuity analyst Neil Maruoka reiterated a Hold rating on VRX, with a price target of $28, which implies an upside of 24.7% from current levels. Separately, on August 3, Morgan Stanley’s David Risinger maintained a Hold rating on the stock and has a price target of $33.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Neil Maruoka and David Risinger have a total average return of -36.4% and 1.2% respectively. Maruoka has a success rate of 15.7% and is ranked #4014 out of 4017 analysts, while Risinger has a success rate of 55.4% and is ranked #1789.
Overall, 3 research analysts have rated the stock with a Sell rating, 9 research analysts have assigned a Hold rating and 5 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $33.90 which is 51.0% above where the stock closed yesterday.
Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, eye health, neurology, and branded generics. The company operates through two operating and reportable segments: (i) Developed Markets and (ii) Emerging Markets. The Developed Markets segment consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device products, as well as alliance and contract service revenues, in the areas of eye health, dermatology and podiatry, aesthetics and dentistry, (ii) sales in the U.S. of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products it developed or acquired, and (iii) pharmaceutical products, OTC products, and medical device products sold in Canada, Australia, New Zealand, Western Europe and Japan. The Emerging Markets segment consists of branded generic pharmaceutical products and pharmaceuticals, OTC products, and medical device products. Products are sold primarily in Central and Eastern Europe (primarily Poland and Russia), Asia, Latin America (Mexico, Brazil, and Argentina and exports out of Mexico to other Latin American markets), Africa and the Middle East.