) fell 3.1% initially when it reported third quarter results on
Oct 31, 2013 due to lowered annual guidance reflecting the
negative impact of currency translation rates and increased
Nevertheless, shares have regained approximately 4.3% in the
last two trading sessions making up for more than it lost.
Valeant reported third quarter 2013 cash earnings per share of
$1.43 (excluding special items and non-cash expenses), up from
the year-ago earnings of 1.15 per share. Excluding stock-based
compensation expense, cash earnings per share came in at $1.41.
The Zacks Consensus Estimate was $1.40 per share.
Revenues for the quarter were $1.54 billion, up 74.4% from the
year-ago period, bolstered by the recent acquisition of Bausch+
Lomb. However, increased generic competition adversely impacted
results. Revenues missed the Zacks Consensus Estimate of $1.67
Product sales at Valeant amounted to $1.51 billion during the
third quarter of 2013, up 76.6% year over year.
Total sales from developed markets jumped 76.6% year over year
to $1.14 billion fuelled by the acquisition of Bausch + Lomb.
Same store organic product sales were 4%. The growth in these
markets was also driven by continued improvement in the
dermatology franchise, aesthetics and oral health portfolios,
orphan drug products and CeraVe.
However, the third quarter results were negatively impacted by
the genericization of the Zovirax franchise, BenzaClin and an
early launch of a generic version of Retin-A Micro. Valeant had
expected generic competition for acne drug Retin-A Micro in early
2014. An early launch of the same has negatively impacted the
bottom line by 4 cents and Valeant expects a further 6 cent
impact in the fourth quarter of 2014.
Sales from the emerging markets grew 68.4% year over year
driven by the acquisition of Bausch+Lomb. The results were also
positively impacted by strong growth in Poland, Russia, South
East Asia and South Africa.
Research & development (R&D) expenses more than
doubled to $49.0 million from $19.2 million in the third quarter
We note that Valeant completed the acquisition of Bausch+ Lomb
in Aug 2013 for $8.7 billion. Valeant now expects synergies of
more than $850 million, up from the earlier estimate of $800
million. Of the total projected synergies, more than $500 million
is expected in 2013. The company remains on track to complete the
acquisition by Jan 1, 2014.
2013 Guidance Revised
Valeant updated its guidance for 2013. Valeant now expects
revenues between $5.7 billion and $5.9 billion, down from the
previous projection of $5.8 billion - $6.2 billion. Sales are
expected to be negatively impacted to the tune of $300 million in
2013 by generic competition for Zovirax, Retin-A Micro and a
number of other brands.
Valeant expects Vanos to lose patent protection in the U.S.
and Wellbutrin in Canada in the fourth quarter of 2013.
Earnings per share on a cash basis are now projected around
$6.11 - $6.16 compared to the earlier projection of $6.00 -$6.20.
Foreign currency exchange rates are expected to hurt the top line
and bottom line by $20 million and 3 cents, respectively.
Although we are disappointed by the lowered guidance, we are
positive on the Bausch+ Lomb acquisition and expect momentum from
Valeant currently carries a Zacks Rank #3 (Hold). Right now,
) look attractive. While Shire is a Zacks Rank #1 (Strong Buy)
stock, Salix Pharma and Forest Labs are Zacks Rank #2 (Buy)
FOREST LABS A (FRX): Free Stock Analysis
SHIRE PLC-ADR (SHPG): Free Stock Analysis
SALIX PHARM-LTD (SLXP): Free Stock Analysis
VALEANT PHARMA (VRX): Free Stock Analysis
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