Why Earnings Were Not the Biggest Disappointment in Valeant’s Report

By Chris Lange Updated Jan 13, 7:06AM EST · Published Jun 7, 10:20AM EDT

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Why Earnings Were Not the Biggest Disappointment in Valeant’s Report — © Wikimedia Commons

[cnxvideo id=”507732″ placement=”ros”]Valeant Pharmaceuticals International Inc. (NYSE: VRX) reported its first-quarter financial results before the markets opened on Tuesday. The company said that it had $1.27 in earnings per share (EPS) on $2.37 billion in revenue. The consensus estimates had called for $1.37 in EPS on $2.38 billion in revenue. In the same period of last year, Valeant reported EPS of $2.36 and $2.19 billion in revenue.

In its Developed Markets segment, revenues increased $186 million, primarily from the acquisitions of Salix Pharmaceuticals and certain assets of Dendreon and their subsequent growth under Valeant’s ownership of $513 million, primarily offset by declining volumes in the neurology portfolio and lower volumes in dermatology of $208 million.

As for the Emerging Markets segment, revenues grew $15 million, primarily from the acquisition of Amoun Pharmaceutical for $59 million, partially offset by a negative foreign currency exchange impact.

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Earnings were not what cratered the stock in Tuesday’s session. Instead it was the outlook. In terms of guidance for the 2016 full year, the company expects EPS in the range of $6.60 to $7.00 and revenues to between $9.9 billion and $10.1 billion. Consensus estimates call for EPS of $8.47 on revenue of $10.86 billion for the full year.

Investment in research and development increased $47 million, or 85%, to $103 million in the first quarter, primarily due to the development programs related to the company’s dermatology product portfolio and programs acquired in the Salix acquisition.

Joseph Papa, chairman and CEO, commented:

The first quarter’s results reflect, in part, the impact of significant disruption this organization has faced over the past nine months. This has been a difficult period for Valeant and its stakeholders, and while there are some challenges to work through in certain business operations in 2016, such as our U.S. dermatology unit, the majority of our businesses are performing according to expectations.

On the books, Valeant’s cash and cash equivalents totaled $1.31 billion at the end of the quarter, compared to $597.3 million at the end of December 2015.

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Shares of Valeant were trading down 20% at $23.03 Tuesday morning. The stock has a consensus analyst price target of $60.22 and a 52-week trading range of $23.55 to $263.81.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.