Valeant Pharmaceuticals (VRX) Stock: I Smell Opportunity

Valeant Pharmaceuticals Intl Inc (NYSE: VRX)

Valeant Pharmaceuticals has had an incredibly hard time in the market over the past several months, and for good reason. Late last year, the company was the subject of several major news stories talking about a scandal. However, since then, I believe that the stock has become a strong opportunity. Today, we’ll talk about the scandal and the opportunity that it has likely created surrounding VRX.

The VRX Scandal

As mentioned above, Valeant Pharmaceuticals has had a hard time in the market over the past several months as the result of a scandal. Late last year, several analysts and even government officials were doing investigations into pricing practices at VRX. However, one analyst found something, and it had nothing to do with pricing practices.

The analyst firm Citron found discrepancies in the company’s books when looking into its relationship with Philidor. Soon, Citron published a report calling VRX the Enron of the pharmaceuticals industry, informing investors that the company had been using its relationship with Philidor to pad the numbers.

While I didn’t want to believe this was the case in the beginning, as time passed, it was hard to ignore. More and more evidence surfaced showing that Valeant Pharmaceuticals had indeed misled its investors. This caused the stock to fall dramatically.

It Also Created An Incredible Opportunity

As investors, our ultimate goal is to buy at a low price and sell at a high price. After all, this is how we make money in the market. With that said, the scandal surrounding VRX created what I believe to be a great opportunity. You see, since the Philidor scandal, the stock has given up far more than 70% of its value, bringing it down to exceedingly low prices.

Nonetheless, I don’t believe that this is where Valeant Pharmaceuticals is likely to stay. The truth is that the company has made several changes since the scandal was announced. To name a few…

  • Management – Since the Philidor scandal, we’ve seen CEO changes and board changes at VRX. These changes have set a new management team in place, and that team is dedicated to turning things around for the company.
  • Philidor Cancellation – Shortly after the announcement of the scandal, Valeant Pharmaceuticals announced that it would be canceling its agreement with Philidor. Now that the agreement between the two is over, VRX will no longer be able to use the relationship to further mislead investors.
  • Walgreens – Finally, VRX announced that it had entered into an agreement with Walgreens. Under the agreement, Walgreens, one of the world’s largest pharmacies, is now selling Valeant branded products, which should help to pick up the sales lost as the result of the canceled relationship with Philidor.

On top of the changes listed above, VRX has been working to improve its business in several areas.

What We Can Expect To See Moving Forward

While it’s going to take some time for Valeant Pharmaceuticals to regain investor trust, the company is far from bankrupt. Over time, as VRX continues to make the right moves, we’re likely to see gains in sales and improvements in business practices. This should lead to gains in the value of the stock in the long run. So, those that get in at current low costs will likely enjoy the rewards of their decision.

What Do You Think?

Where do you think VRX is headed moving forward and why? Let us know your opinion in the comments below!