Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals had an incredibly strong start to the trading session this morning. When the opening bell rang, the stock was trading well into the green. While the stock has been experiencing slow, yet steady gains throughout the day, it is still trading with very strong profits at the moment. The movement is being caused by an agreement that was announced today. Below, we’ll talk about the agreement, what we’re seeing from the stock as a result, and what we can expect to see from VRX ahead.
VRX Enters Agreement To Sell Brands
As mentioned above, Valeant Pharmaceuticals is having a relatively strong day in the market today as the result of an agreement that was announced early this morning. The agreement is to sell a high value part of the business. VRX will soon be selling CeraVe, AcneFree, and AMBI. The buyer of the brands will be L’Oréal. In the announcement, we learned that this sale will generate a total of $1.3 billion in cash. This is a relatively strong deal considering that these brands combined produce about $168 million annually in revenue.
Of course, this is a good deal for L’Oréal as well. Think about it. The company will be bringing on three brands that already have good names. At the current annualized revenue rate, they got the products at a deal that will pay itself off in about 7.7 years. However, by putting their strong brand behind the product, chances are that sales will move a bit faster.
In a statement, Joseph C. Papa, CEO at VRX had the following to offer…
“We are pleased to announce the progress we are making in reshaping our product portfolio and driving value for our shareholders… The success of these products, and today’s transaction, is a testament to the Valeant teams who have impressively grown these brands over the past several years. We believe these products will benefit even further from the resources and capabilities of a global beauty company like L’Oréal, which is well equipped to build on the success of these brands and expand into new global markets. Our remaining consumer products business is well positioned for continued advancement within Valeant’s portfolio.”
What We’re Seeing From The Stock As A Result
As investors, one of the first things that we learn is that the news moves the market. In this particular case, the news that was released with regard to Valeant Pharmaceuticals was overwhelmingly positive. So, it makes sense that we are seeing a positive response. In the beginning of the day, the stock started well into the green on the news. However, as further questions with regard to the future of the company, we’ve seen steady losses. At the moment (12:13), VRX is trading at $16.29 per share after a gain of $0.94 per share or 6.12% thus far today.
What Investors Should Be Watching Ahead
Moving forward, investors have a lot to think about here. VRX is, and has been, struggling with regard to the Philidor scandal. While the CEO that took over after the scandal, Joseph Papa is making big changes, we have to figure out whether or not these changes will be enough to effect the long run outlook for the company. With drug pricing pressures and a struggling company that desperately needs to increase prices, the risks are there. However, if they can get through the hard times, this could also be an incredible opportunity.
What Do You Think?
Where do you think VRX is headed moving forward? Join the discussion in the comments below!
Other Modest Money Coverage Of VRX