Siliq Won’t Bring Valeant Pharmaceuticals Intl Inc (VRX) Stock Back to Life

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It’s always tempting to buy beaten-down stocks based on promises of greater things to come, especially when they’re clinical-stage biotechs with lots of prospective new drugs in the hopper. But doing so requires extreme patience, and the payoff frequently isn’t what you expected. That’s what’s happening with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) since its new psoriasis drug gained FDA approval.

Siliq Won’t Bring Valeant Pharmaceuticals Intl Inc (VRX) Stock Back to Life

The drug is called Siliq, and it will target patients with moderate-to-severe plaque psoriasis, which affects 1.5 million Americans alone. That’s a pretty big market — one that could translate to billions of dollar in sales.

What complicates things is the drug’s rather sordid history in the developmental stages.

Siliq Troubles Hurting Valeant

In phase 3 trials, Siliq caused some test patients to have suicidal thoughts; tragically, a few of them acted on those thoughts. Co-developers Amgen, Inc. (NASDAQ:AMGN) and AstraZeneca Plc (ADR) (NYSE:AZN) both essentially pulled the plug on the drug, and AstraZeneca sold the rights to Valeant for $100 million in 2015.

That’s when things got really bad for Valeant: its drug distributor, Philidor, was investigated and charged with giving illegal kickbacks, prompting the dissolution of Philidor and the resignation of Valeant CEO Michael Pearson due to his company’s relationship with Philidor.

Oh, and new CEO Joseph Papa subsequently sold Siliq’s European distribution rights to give Valeant some much-needed cash, thus limiting the drug’s global sales potential. And while its sales potential in America is nothing to sneeze at, the psoriasis drug market in the U.S. is already quite crowded — and many of those drugs won’t be required to put a black box on their prescription labels that mentions the potential suicide risks.

Needless to say, the Siliq mess has been a disaster for Valeant stock.

How disastrous? VRX stock has lost nearly 94% of its value since August 2015, free-falling from $262 to as low as $13 last month. VRX has recovered slightly in the last month, bumping up to $16 after Siliq gained FDA approval. But investors aren’t exactly flocking to Valeant stock, and VRX still trades for less than half of its 52-week high around $35.

Now, you could argue that VRX represents a great value at such insanely depressed levels. After all, the stock does trade at a mere 3 times forward earnings estimates. But if a seemingly major catalyst like long-awaited FDA approval of a drug targeting a large market barely moves the needle for VRX stock, what will?

Maybe when Siliq hits the market and starts generating the kind of sales that initially excited the likes of big pharmas Amgen and AstraZeneca, investors will return to Valeant in droves.

Right now, though, it’s clear VRX remains toxic on Wall Street.

Too Early to Touch VRX

So while gaining FDA approval for Siliq is an important win for a company that has taken so many Ls over the past 18 months, I wouldn’t invest in Valeant based on it. The stock needs to prove itself before you should even consider jumping back in the pool. Trading just a couple dollars higher than seven-year lows, VRX simply isn’t worth the gamble.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/valeant-valeant-stock-vrx-vrx-stock/.

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