Based on nothing more than recent optimism from Valeant Pharmaceuticals Intl Inc (NYSE:VRX) CEO Joe Papa — and the fact that it’s selling assets to pay down debt — it would be easy for owners of VRX stock to get excited. The struggle has gone on long enough, and it’s time for patience to be rewarded.

Problem is, optimism doesn’t pay the bills.

While Papa is making a bold effort to chip away at the company’s debilitating debt and his argument that Valeant Pharmaceuticals is on the verge of a turnaround holds some water, Valeant stock remains more of an asset than a liability.

VRX Stock: Turnaround Plans

The saga of Valeant Pharmaceuticals is a long and sordid one … too long to tell. Here’s the Q&D version: The company acquired a great number of specialty drugs, with the primary intent of raising their prices (just because the company could). It went into too much debt to make those purchases, and as it turns out, the healthcare market and its overseers weren’t as willing to pay exorbitant prices for most of its high-profile pharmaceuticals. The whole thing came crashing down beginning in late-2015, resulting in a jaw-dropping 94% pullback for Valeant stock.

Fast forward to today. VRX has a new CEO — the aforementioned Joe Papa — who everyone hopes has a viable plan to save the sinking ship. It’s going to be a long and difficult battle though.

The turnaround plan is two-fold. First, whittle away as much debt as possible.

Valeant’s total long-term debt ballooned from a mere $3.5 billion in 2010 to a whopping $30.4 billion as of the most recent quarterly filing. Granted, that debt was taken on to finance the purchase of new drugs, and sales growth has been impressive.

It has come at a cost though. That debt burden costs the company about $470 million every quarter. That’s a big chunk of change for an organization that only generates on the order of $2.5 billion in quarterly revenue, and only turns about 70% of that into gross (pre-operating expense) profit. If VRX is to be saved, the debt has to be dealt with.

And it is. Most recently, Valeant announced it was letting go of its Dendreon assets and some of its skin-care assets, and pocketing $2.1 billion as a result. The proceeds of the sales would be applied directly to the company’s debt. Papa says his plan is to reduce long-term debt by $5 billion within the next year and a half.

The second element of VRX’s turnaround plan is more straightforward … it needs to start selling more of its drugs at a better price. This may be the tougher of the two missions, though.

Calling a spade a spade, Valeant Pharmaceuticals got too greedy, and then paid the price for it. More specifically, its price-hikes were stratospheric, putting former CEO Michael Pearson on the hot seat of a House Oversight Committee inquiry.

Papa has promised to rein in the rampant price hikes, vowing to limit any annual increases to single-digit levels.

What’s great for consumers and patients, though, isn’t necessarily great for the value of VRX. How is the company going to satisfy growth-hungry investors? A stronger focus on specialty drugs for one, led by dermatology, eye-care and gastrointestinal products, where Valeant already has a strong presence. Papa also believes China and Japan could serve up significant growth.

Valeant Stock Is Still Too Challenging to Own

The double-barreled turnaround plan for VRX stock looks good … on the surface. The more one studies it though, and when one looks under its hood, the more red flags begin to wave.

Take the company’s overwhelming indebtedness, for example. Culling the $30.4 billion burden is a huge step in the right direction, but that would still leave Valeant saddled with a quarterly interest expense of roughly $393 million. For perspective, last quarter’s gross profits were only $1.82 billion, and recurring operating expenses rolled in at $1.57 billion. All the debt would have to go away to make a meaningful dent, and that’s just not in the cards.

Some fans and followers of VRX stock believe the company could grow its way out of its woes, but that may be more wishful thinking as well. Remember, this is a company that was largely built on the business model of buying drugs with the sole intent of raising their price; the company doesn’t add much value to the portfolio it has purchased. That’s a tough M.O. to escape, try as Valeant might.

And, even to the extent Papa can overhaul the corporate culture, there’s little assurance it will be able to grow revenue for its flagship products.

In the meantime, Papa has acknowledged that the loss of exclusivity for some of its portfolio last year and this year will take an estimated $800 million toll on the top line. That’s almost a tenth of its total revenue.

Investors could easily do a lot better than even taking a speculative swing on Valeant stock.

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