NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) stock is slumping by 1.48% to $100.63 in mid-morning trading on Tuesday, as CEO J. Michael Pearson was hospitalized on Friday for a severe case of pneumonia and will take a medical leave of absence.
While Pearson is on leave, an Office of the Chief Executive Officer will assume his duties. The group will include a number of executives such as General Counsel Robert Chai-Onn, Group Chairman Ari Kellen and Chief Financial Officer Robert Rosiello.
The board has also created a committee to oversee the Office of the Chief Executive Officer. The oversight committee includes lead independent director Robert Ingram, ValueAct Capital president G. Mason Morfit and former Valeant CFO Howard B. Schiller.
The specialty pharmaceutical and medical device company has faced heightened scrutiny in recent months about its drug pricing practices and its contentious relationship with specialty pharmacy Philidor, which Valeant has since ended.
"It is an inopportune time for their leader to take sick leave after the company has faced credibility issues in recent months," Morningstar analyst Damien Conover told Reuters. "If the company was on solid footing, it wouldn't be as much of an issue."
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate VALEANT PHARMACEUTICALS INTL as a Hold with a ratings score of C. 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 3.5%. 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. The firm also exceeded the industry average cash flow growth rate of -0.44%.
- 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 ($10.28 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. In comparison to the other companies in the Pharmaceuticals industry and the overall market, VALEANT PHARMACEUTICALS INTL's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The share price of VALEANT PHARMACEUTICALS INTL has not done very well: it is down 18.23% 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full analysis from the report here: VRX