Shares of beleaguered drug maker Valeant Pharmaceuticals Intl Inc (NYSE:VRX) are on the mend, popping roughly 8% on Monday to test above their 50-week moving average for the first time since summer 2015. This is one of a few good signs for VRX stock, which could have as much as 30% upside in the weeks ahead.
Valeant was the center of an epic fall from grace after a takedown by the folks behind Citron Research dropped the stock from its high of $263.81 in 2015 to a low of $8.31 thisApril — a decline of some 87% — after dubbing it the “Pharmaceutical Enron” for its relationship with specialty pharmacy Philidor.
The company was also the subject of negative press concerning drug price inflation, and now it faces crippling debt among other fundamental issues.
But now, shares are enjoying a rebound amid broad buying interest in the drug/biotech space thanks to dimmed hopes for the GOP’s healthcare reform bill and a delay to possible executive action from the White House on drug prices. Also helping have been reports that company bondholders might conduct a debt-for-equity swap, relieving balance sheet pressure.
Other positive news for VRX stock included the announcement that John Paulson of Paulson & Co., the well-known investment firm, was elected as a director earlier this month, bolstering the company’s leadership team.
As mentioned above, Valeant shares are testing the 50-week MA. Also encouraging is that VRX stock has jumped above its 200-day moving average, shown on the above chart.
When it last reported on May 9, earnings of $1.79 per share came in well ahead of the estimate for a loss of $1.93 despite an 11.1% drop in revenue. That has also helped propel shares higher. However, Valeant won’t have another report on the schedule until Aug. 8, when analysts will be looking for earnings of 98 cents per share on revenues of $2.23 billion.
For now, though, VRX stock still could have considerable upside. Watch for a return to the October consolidation range near $22, which would be worth a nearly 30% gain from here.