Once Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was a Wall Street darling, but no one loves you when you’re down and out. Even news about pricing for its recently approved plaque psoriasis treatment wasn’t enough to give VRX stock a lift.
VRX opened Friday, April 21, trading at $8.88 per share, giving it a market cap of just less than $3 billion — despite 2016 revenues of $9.674 billion. Just two years ago, shares went for more than $200 and couldn’t get enough of it. Now some are predicting it will soon be worthless.
Valeant’s appeal was based on a scam tied to its market cap. It bought drug companies, raised product prices, fired the researchers and moved the profits to Canada and its lower rate. Once the bubble was popped, that was the end of VRX stock.
But aren’t the pieces worth something? They are, but only to someone else.
Valeant Is Buried Under a Mountain of Debt
Valeant Pharmaceuticals borrowed money to acquire its assets, which at its height included a host of well-known skin care, eye care, digestive health and cancer drug brands. Many of these assets were bought at a market top, and once VRX became a distressed seller, buyers weren’t willing to pay those prices any more.
Valeant still owns many top brands — Wellbutrin for depression, Boston contact lens cleaner, Solodyn for acne and Jublia for toenail fungus. But these brands are in competitive markets, they require marketing to maintain their market shares, and Valeant is now husbanding cash.
The analysts who say the company is worthless only need to point to the balance sheet. At the end of 2016 it showed $29.845 billion in debt carrying $43.529 billion in assets. But are those assets still worth $43.529 billion?
Not in today’s market.
For instance. Valeant had bought Salix, which makes drugs to treat digestive disorders, for $14.5 billion. A year later it moved to sell the company, to a Japanese firm, for $10 billion. Then the Japanese firm backed out, soon after Valeant reported a loss of $1.218 billion $3.49 per share, for its September quarter.
Valeant recently said it would expand its sales force for Salix, focusing on primary care physicians, but every primary care physician has read of the “Valeant scandal,” its abuse of specialty pharmacies to force payments on high prices.
To these doctors, the Valeant name is worthless.