It’s make-or-break time for Valeant Pharmaceuticals Intl Inc (VRX) stock. Actually, it’s more like a remake-or-break time … Valeant shares are already broken, having fallen nearly 90% from 52-week highs.
If you don’t know about the trials and tribulations surrounding VRX stock, it’s at least plausible that you’ve literally been living under a rock for the past six or seven months.
The massive pharmaceutical company, whose business model basically amounted to buying companies with successful drugs of their own, slashing workforce and R&D at those companies and then jacking up prices, increasingly came under fire in 2015.
Thanks, Shkreli.
Then, famed short-selling firm Citron Research issued a scathing note on VRX stock, questioning Valeant’s mysterious relationship with a specialty pharmacy called Philidor. Valeant sold quite a bit of product to Philidor … and also owned it. Were these phantom sales?
Now, after delaying the release of its annual report by several months and nearly defaulting on its not-so-insignificant debt load ($30 billion), VRX is definitively in turnaround mode. And Wall Street just found out what Step 1 of that turnaround plan is going to be:
VRX Looking to Sell Its Assets
“People familiar with the matter” told Fortune that Valeant is consulting with Goldman Sachs Group Inc (GS) and Centerview Partners Holdings to find buyers for various parts of its business. Things can change on a dime, but in early trading, the market was taking the news well, with VRX stock up more than 1%.
While Fortune says that no “major businesses” have been put on the chopping block, there are clues as to what could be first to go:
“One coveted asset is Xifaxin, the largest product in Valeant’s gastrointestinal division, which it acquired last year as part of its $11 billion acquisition of Salix Pharmaceuticals, the sources said.
Other assets that have attracted interest from potential bidders include its esthetics products, Obagi and Solta, and its skin care product, CeraVe, some of the sources added.”
It’s definitely good news that Valeant stock is making moves to clean up its balance sheet in a hurry. Sometimes you just have to rip the Band-Aid off, get the worst part over with and move on with your life.
It’s a lesson that Yahoo! Inc. (YHOO) was slow to realize. Only now, four years after the golden child Marissa Mayer joined Yahoo from Alphabet Inc (GOOG, GOOGL) to orchestrate a turnaround, is the company even getting close to selling off parts of itself.
Sure, Yahoo’s dilemma is about finding growth opportunities while the concern with VRX is staying solvent. But I also think if Mayer had owned a sizable percentage of the company — I’m talking of course about hedge funder and new board member Bill Ackman’s multibillion-dollar bet on VRX stock — she would’ve been more open to seeing the Band-Aid approach.
Selling off assets to meet debt obligations was inevitable, and it’s good to hear that it’s happening now.
With the company’s long-awaited financials finally due out in late April, we could be in for something we haven’t seen in a long time: More good news from Valeant.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
