Shares of Valeant Pharmaceuticals International, Inc. (VRX) jumped 6.2% after the company provided better-than-expected outlook for 2015.
The company also updated the guidance for fourth-quarter 2014. Revenues in the fourth quarter are now projected around $2.2 billion, in the middle of the previously-projected range $2.1 billion – $2.3 billion driven by strong organic growth across almost all business units, along with continued strong performance from Jublia and other recently launched products. The Zacks Consensus Estimate stands at $2.2 billion as well, in line with the company projection.
We note that in Nov 2014, the FDA approved Valeant’s Onexton Gel, 1.2%/3.75% for once-daily treatment of patients (aged 12 years and above), suffering from acne vulgaris (including non-inflammatory comedonal and inflammatory acne). Onexton is the fourth product in Valeant’s dermatology portfolio to obtain FDA approval over the last 12 months following Jublia 10%, Retin-A Micro microsphere 0.08% and Luzu 1%. The company further intends to launch Onexton in early 2015.
Cash earnings per share (EPS) are projected to come at $2.55 or above, toward the higher-end of the previously-projected range of $2.45 – $2.55 per share.
Revenues for 2015 are now projected to come around $9.2 billion – $9.3 billion, reflecting a year-over-year growth of approximately 14% – 15% and above the earlier projection of $9.1 billion. The Zacks Consensus Estimate currently stands at $9.0 billion.
Generics are projected to adversely impact revenues to the tune of $200 million (Targretin in Jul 2015 and Xenazine in Aug 2015). Cash EPS in 2015 is estimated at $10.10 to $10.40, up from an earlier forecast of about $10.00 per share.
Same store sales growth is estimated at 10% – 12%, as nearly all business units to deliver above 10% organic growth. Revenues from key launch programs – Jublia, Ultra (Toric and Multi Focal), Luzu, Retin-A Micro 0.08%, Onexton – are estimated to come over $500 million in 2015.
After a failed bid to acquire Allergan (AGN) in 2014, Valeant now aims to focus on building existing platforms, adding new platforms in fast-growing markets or acquiring tail products with extremely high internal rate of return or fast payback periods in developed markets in 2015. The strategy for emerging markets is to focus on branded generics and OTC’s, and expanding in Asia, Middle East and Latin America. The company also plans to focus on over 250 branded generic introductions in Europe, Asia and Latin America.
Our Take
Valeant’s aggressive pursuit of acquisitions over the last two years, which contributed to its solid growth, is expected to continue through 2015. Organic growth also looks encouraging especially in dermatology, contact lens and Asia. We are impressed by the company’s positive outlook for 2015 and expect a strong performance this year. The company has quite a few launches lined up as well for 2015 in the Consumer and Surgical businesses in the U.S.
Valeant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Biodel Inc. (BIOD), Apricus Biosciences, Inc. (APRI) and Shire plc (SHPG). All these stocks carry a Zacks Rank #1 (Strong Buy).
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