
Valeant (VRX) Stock Collapses to Two-Year Low on Drug Pricing Investigations
NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) stock is plunging by 15.27% to $77.91 in late morning trading on Thursday, as it faces heightened scrutiny about its drug pricing practices.
On Wednesday, the U.S. Senate's Special Committee on Aging announced that it is launching a bipartisan investigation into Valeant and three other pharmaceutical companies regarding their drug prices. The probe follows recent accusations that Valeant collaborated with specialty pharmacy Philidor to vastly inflate prices.
Additionally, democrats within the House of Representatives yesterday launched the Affordable Drug Pricing Task Force to combat soaring drug prices. Democratic members of the House have urged their republican counterparts to call a vote to subpoena Valeant.
Valeant is already the subject of a federal investigation in New York and Massachusetts about drug price hikes.
Further, activist investor Bill Ackman, a top shareholder of Valeant, increased his stake in the company by roughly 2 million shares following Citron's allegations. However, before doing so, he pressured company executives for answers, indicated that the CEO might have to leave and considered unloading his entire $3.8 billion investment, the Wall Street Journal reported.
Separately, TheStreet Ratings team rates VALEANT PHARMACEUTICALS INTL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate VALEANT PHARMACEUTICALS INTL (VRX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 35.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $736.40 million or 19.02% when compared to the same quarter last year. In addition, VALEANT PHARMACEUTICALS INTL has also vastly surpassed the industry average cash flow growth rate of -58.99%.
- VALEANT PHARMACEUTICALS INTL has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALEANT PHARMACEUTICALS INTL turned its bottom line around by earning $2.67 versus -$2.62 in the prior year. This year, the market expects an improvement in earnings ($11.72 versus $2.67).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Pharmaceuticals industry and the overall market, VALEANT PHARMACEUTICALS INTL's return on equity is below that of both the industry average and the S&P 500.
- The share price of VALEANT PHARMACEUTICALS INTL has not done very well: it is down 14.08% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: VRX
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.








