Valeant Pharmaceuticals (VRX) reported fourth quarter 2013 cash earnings per share of $2.15 (excluding special items and non-cash expenses), up from the year-ago earnings of $1.22 per share.
Excluding stock-based compensation expense, cash earnings per share came in at $2.14. The Zacks Consensus Estimate was $2.06 per share.
Revenues for the quarter soared 109.2% year over year to $2.1 billion on the recent acquisition of Bausch + Lomb. Revenues were in-line with the Zacks Consensus Estimate.
Quarterly Highlights
Product sales at Valeant amounted to $2.03 billion during the fourth quarter, up 115.7% year over year.
Total sales from developed markets jumped 122% year over year to $1.6 billion buoyed by the acquisition of Bausch + Lomb. Same-store organic product sales were 13%. The growth in these markets was also driven by continued improvement in the dermatology franchise, aesthetics and oral health portfolios, consumer, neurology and other and oral health portfolios.
However, the fourth quarter results were negatively impacted by the genericization of the Zovirax franchise, BenzaClin and launch of a generic version of Retin-A Micro.
Sales from the emerging markets grew 77.0% year over year driven by the acquisition of Bausch + Lomb. The results were also aided by strong growth in Poland, Russia, Middle East and China.
Research & development (R&D) expenses more than doubled to $59.5 million from $20.1 million in the fourth quarter of 2012.
We note that Valeant acquired Bausch + Lomb in Aug 2013 to strengthen its ophthalmology business, which was a miniscule portion of Valeant’s overall portfolio. Valeant expects synergies of more than $850 million from the acquisition.
2013 Results
Sales came in at $5.8 billion, up 66% from 2012 and above the Zacks Consensus Estimate of $5.7 billion. Cash earnings per share of $6.24 (excluding special items and non-cash expenses), were up from the year-ago earnings of $4.14 per share. Excluding stock-based compensation expense, cash earnings per share came in at $6.30. The Zacks Consensus Estimate was $6.04 per share.
2014 Guidance
Valeant updated its guidance for 2014. The company now expects revenues between $8.2 billion and $8.6 billion. Sales are expected to be negatively impacted to the tune of $200 million in 2014 due to generic competition for Zovirax, Retin-A Micro and a number of other brands. Valeant aims to complete the integration of Bausch + Lomb in 2014 and expects a major chunk of synergies ($850 million) by the second half of the year.
The company also plans to launch new key products – Bensal, Jublia, Luzu, Neotensil, PeroxiClear and Zeus – in 2014. Moreover, Valeant expects to focus on the emerging markets – Middle East, Russia/CIS and Southeast Asia.
The first half of 2014 will be burdened by heavy launch costs related to new products and expansion of sales force in Valeant’s aesthetics and oral health businesses.
Earnings per share on a cash basis are now projected around $8.25–$8.75. Foreign currency exchange rates are expected to hurt the bottom line by 10 cents, respectively.
We are encouraged by the fourth quarter beat and positive outlook for 2014. Valeant currently carries a Zacks Rank #3 (Hold).
Right now, stocks like Shire (SHPG), Auxilium Pharmaceuticals (AUXL), and Forest Laboratories (FRX) look attractive. All three carry a Zacks Rank #1 (Strong Buy).
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