Valeant Pharmaceuticals (VRX) Stock: Gaining On Licensing Changes

Valeant Pharmaceuticals Intl Inc (NYSE: VRX)

Valeant Pharmaceuticals is having an incredible day in the market today and for good reason. The company made an announcement early this morning with regard to an agreement it has with AstraZeneca (NYSE: AZN). Today, we’ll talk about the announcement, how the market reacted to the news, and what we can expect to see from VRX moving forward. So, let’s get right to it…

VRX Announces Amendments To AZN Agreement

In August of 2015, Valeant Pharmaceuticals entered into an agreement with AstraZeneca surrounding a drug known as brodalumab. Brodalumab is an IL-17 receptor monoclonal antibody. The treatment is currently under regulatory review for patients with moderate-to-severe plaque psoriasis.

According to the announcement today, the two companies have decided to terminate the company’s right to develop and commercialize the treatment in Europe. Under the amended agreement, VRX will maintain the license to develop and commercialize the treatment in the United States. The company will also retain the license to develop and commercialize brodalumab in the remainder of territories outside of the United States.

In exchange for VRX agreeing to terminate rights in Europe, AZN will offer payment. First and foremost, there will be an upfront payment of a currently undisclosed amount. On top of that, Valeant Pharmaceuticals will still be receiving certain sales-based milestone payments. Finally, one of the pre-launch milestone payments has been reduced, but is still active. In a statement, Joseph C. Papa, Chairman and CEO at VRX had the following to offer…

We are pleased with this new licensing arrangement for broadalumab, which enables us to more sharply focus our efforts on delivering this important treatment to patients in the U.S. and other key markets, while providing us with immediate value and significant ongoing exposure to the treatment’s commercialization in Europe… Our current focus is on the upcoming advisory panel, where we will have the opportunity to discuss brodalumab treatment options for adult patients with moderate to severe plaque psoriasis and provide information about this novel antibody we are developing.”

How The Market Reacted To The News

As investors, one of the first things that we learn is that the news moves the market. Any time positive news is released with regard to a publicly traded company, we can expect to see gains in the value of the stock associated with the company. The news released by VRX today was overwhelmingly positive. So naturally, we’re seeing gains in the value of the stock. Currently (11:58), the stock is trading at $20.92 per share after a gain of $0.81 per share or 4.03% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from VRX. First and foremost, I’m excited about today’s amended agreement news. As a result of the amended agreement, Valeant Pharmaceuticals not will receive immediate payments. On top of that, the company will also be receiving milestone payments as the treatment makes it to the market. However, today’s announcement isn’t the only reason that I maintain a bullish opinion of what we can expect to see from VRX.

Throughout the past several months, the company has been struggling as the result of the Philidor scandal. However, since the scandal, we’ve seen nothing but positive news. With a new CEO, new board members, new contracts and more, it seems as though VRX is finally headed in the right direction. All in all, I’m expecting to see long run gains from the stock.

What Do You Think?

Where do you think VRX is headed?