VRX Stock Forecast: Valeant Veers Away From Scandals, Rebrands Company


This article was written by Julia Masch, a Financial Analyst at I Know First.



“The entire pharmaceutical industry has  a lot of work to do to restore public trust.”

Kenneth C Frazier


(Source: Wikimedia Commons)



  • Q1 Highlights + Product Pipeline
  • Scandals + Valeant’s Valiant Name Change
  • Current I Know First Forecast For VRX

Over the past year, Valeant’s stock price has increased by a whopping 112.46% to a closing price of 26.6, a 52 week high, on June 12, 2018. Over the past year, the company has been working to decrease its debt while restoring its public image after a slew of scandals.

Q1 Financials

For Q1 2018, Valeant outperformed expectations. The company had revenues of $1.995, billion which was a 5.4% decrease from Q1 2017, but still above analyst estimates of $1.949 billion. This translated to non-GAAP earnings per share (EPS) of $0.88.

(Source: Yahoo Finance)

The company has consistently outperformed analyst expectations for earnings over the past four quarters. Earnings were ~ -$2.69 billion because the company took a large loss in the process of ending litigation over antitrust allegations which I will discuss in more depth later.

(Source: Yahoo Finance)

The company decreased R&D 4.2% to $9.2 million and diminished SG&A expenses from $651 million to $587 million since Q1 2017.

Q1 Highlights + Product Pipeline

The company’s individual segments did well too; the Bausch + Lomb/ International segment’s revenues were down 3% to $1.103 billion while the branded Rx segment’s revenues were $593 million compared to $629 million in Q1 2017. While these numbers do not seem positive, it is important to acknowledge the impact of divestitures and discontinuations that the company has embarked in order to decrease debt. Excluding this, there was organic growth of 2% and 8% respectively for these segments. This is extremely significantly as this is the first time since 2015 that Valeant has delivered overall organic revenue growth. Additionally, the company grew YoY revenue 15% in Global Vision Care and increased in the aggregate in China by 24%.

On top of this, there are launches underway that the company believes will significantly impact revenue: VYZULTA™ is a treatment option for glaucoma and LUMIFY™ uses low-dose brimonidine to decrease eye redness and is the only product of its kind. A Additionally, Salix pharmaceuticals is a subsidiary of Valeant that is committed to treating gastrointestinal diseases and increased its revenue Q1 2018 revenue 40% compared to Q1 2017. Salix combined with Bausch + Lomb account for 76 percent of Valeant’s business, so growth in these sectors makes a major impact for the company. On top of this promising growth, the FDA recently approved PLENVU® which can be used in preparation for colonoscopies and should be available starting in the third quarter of the year. Also in the pipeline, the company just completed Phase 2 studies for IDP-120, a topical acne treatment that is a unique mixture of tretinoin and benzoyl peroxide gel, and will begin Phase 3 studies later in the year. This novel combination will provide a competitive solution in the large acne solutions market.

Resolving Scandals

Valeant has taken part in its share of scandals over the year. Since 2018 began, the company has achieved dismissals or positive outcomes in 20 legal matters. The most significant of these involved a former executive, Gary Tanner, who engaged in fraud and money laundering with a pharmaceutical company called Philidor. However, the company was able to clear up the debacle with no finding of admission or liability by Valeant, instead only the executive at fault was found guilty. However, the legal fees were significant. On top of this, the company has been scrutinized in the past for significantly increasing cardiac drug prices. Additionally, the company struggled when there was 5 month investigation into the company’s accounting and finances during Howard Schiller’s tenure as CEO.

Valeant’s Valiant Name Change

In an attempt to distance themselves from these scandals, on May 8, the company announced it will change its name to Bausch Health Companies (BHC) and introduce a new corporate brand identity in July. The company believes “the Bausch name embodies the rich history of innovation, fortitude and dedication to patient health” and hope the positive image transfers to the entire company instead of just the Bausch + Lomb sector. Since joining the company, CEO Joseph Papa has emphasized his commitment to distancing the company from scandal, fixing the balance sheet, and developing new and improved drugs.

(Source: Wikimedia Commons)

Valeant has a massive amount of debt it is currently coping with. When Papa joined the company, it owed over $27 billion to various creditors because one of the previous strategies Valeant employed was to acquire other drug companies, cut research, and then raise prices. However, these buyouts only added to the company’s debt which almost reached $30 billion and led to per quarter interest payments per quarter were over $400 million. Papa has begun working to reduce this weight on the company, he has sold many non-core assets and focused on divestitures to make money to the company. He has already decreased the debt by 2 billion to slightly over $25 billion. In the meantime, he is working to refinance the debt to minimize interest payments. Most recently, on May 17, the company announced it plans to borrow $3.815 billion in Term B loans which issuing $1.5 billion of secured and unsecured securities. This will replace current term B loans with new ones that have lower interest rates. While the company still has a long way to go, it is working to pay off its loans and will continue in the upcoming quarters.

Technical Analysis

Over the past 3 months, the stock price has surpassed both the 50 day (purple) and 200 day (orange) Simple Moving Averages (SMA) for VRX indicating a bullish trend for Valeant. Additionally, in early May, the 200 day and 50 day SMAs intersected with the 50 day SMA moving ahead, forming a “golden cross” and further solidifying the company’s bullish forecast.

(Source: Yahoo Finance)

Analyst Recommendations

There is a large variety in the analyst recommendations according to Yahoo Finance’s polling. More than half of analysts believe Valeant is a hold, but others believe otherwise across the scale from sell to strong buy.

(Source: Yahoo Finance)

Current I Know First VRX Forecast

The I Know First algorithm currently has a bullish forecast for Valent in the short term and long term with an extremely strong signal of 423.26 with a high predictability signal of .75 for the one year time horizon.


With Joseph Papa at the helm, Valeant is restoring its public image, growing key brands, stabilizing loss from older products, and focusing on products in the pipeline. Hopefully, the scandals the company has faced in the past are history as it changes its name to Bausch Health Companies which will be effective July 1. This name change will also allow the company to focus on niches such as eyecare where it already has leadership through its subsidiary Bausch and Lomb. Additionally, the fact that the company is having its first organic growth since 2015 shows a promising future for Valeant’s future revenue. On top of that, the fact that the company’s earnings have exceeded expectations for the last 4 consecutive quarters shows that the company is capable of demonstrating strong performance. Finally, the company’s initiatives to reduce debt are underway and the newest refinancing will decrease interest payments for the company. The future looks bright for Valeant as the technical analysis and current I Know First algorithm show a bullish trend for the company.

Past I Know First algorithm Success with VRX

On June 13, 2017, the I Know First algorithm produced a bullish forecast for Valeant over a 14 day time horizon. In accordance with the forecast, the stock rose 31.62% in these 2 weeks.

Current I Know First subscribers received this bullish NANO  forecast on June 13, 2017.

Subscribe to I Know First’s Daily Market Forecast

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.

How to read the I Know First Forecast and Heatmap