Canadian pharmaceuticals company
Valeant Pharmaceuticals International, Inc.
(
VRX
) recently announced preliminary fourth quarter and full year 2011
results as well as issued 2012 guidance.
Fourth Quarter and Fiscal 2011 Guidance
The company expects to book organic growth of at least 8% in the
fourth quarter of 2011 with total revenue of more than $650
million. In the quarter cash earnings are expected to range between
83 cents and 87 cents per share (prior guidance: 80 cents-95
cents). Foreign exchange is estimated to have a negative impact of
$40 million on the top-line and 5 cents on earnings. Moreover,
adjusted cash flow from operations is anticipated to be greater
than $230 million.
For full year 2011 Valeant Pharma expects total revenue growth
of 27% over 2010 levels. Product sales are also expected to grow
27% over 2010. However, in organic terms (excluding the impact of
one-time revenues, acquisitions and foreign exchange), the company
maintained its previously provided guidance to grow 8% year over
year. Adjusted cash flow from operations is expected to rise
39%.
2012 Guidance
For 2012, total revenue is expected in a range of $3.1-$3.4
billion, representing an increase of 30-40% over 2011 levels. Cash
earnings are expected to come in a band of $3.95-$4.20,
representing an increase of 40-45% over 2011 levels. However,
neither the top- nor the bottom-line includes the potential
negative impact from currency fluctuations which was primarily a
tailwind in 2011. The 2012 guidance also excludes the effects of
potential acquisitions in 2012. The guidance however takes into
account the $45 million milestone payment to be received from
partner
GlaxoSmithKline
(
GSK
) on launch of Potiga. Potiga, which was approved in June 2011in
the US for use as an adjunctive treatment of partial-onset
seizures, is now expected to be launched in March/April 2012, later
than prior expectations of a launch in January/February 2012. The
Zacks Consensus Estimates for revenue and earnings per share are
$3.2 billion and $3.91, respectively.
Moreover, adjusted cash flow from operations is expected to be
greater than $1.2 billion, representing an increase of 33% over
2011 levels. However divestitures and generic competition to some
of the drugs are expected to weigh upon cash flows by $200 million.
The company expects to generate $200 million in cost synergies in
2012 from the various businesses acquired in 2011. In a break from
the past, the company refrained from providing specific organic
growth guidance for 2012 as it takes the acquisition route to drive
profitability.
New Segment Reporting
Following a number of acquisitions made in 2011, Valeant Pharma
changed its segment reporting. Though the US Dermatology, US
Neurology, and Canada/Australia segments remain as it is, the
company has combined its branded generic businesses in Europe and
Latin America into one Emerging Markets segment. It will break out
the Emerging markets segment into three sub-categories: Emerging
Markets-Latin America, Emerging Markets-Central/Eastern Europe and
Emerging Markets-South East Asia/South Africa.
Segment Outlook
The US Dermatology segment is expected to post revenues of
$900-$950 million in 2012, representing an increase of 60-75% over
2011 levels following closure of the acquisition of Dermik, the
dermatology unit of
Sanofi
(
SNY
) and Ortho Biologics, a dermatology unit of pharma giant
Johnson & Johnson
(
JNJ
). The US Neurology segment is expected to post revenues of
$675-$750 million in 2012, down 5-15% over 2011 due to a lingering
weak performance of depression drug Wellbutrin and the availability
of generics for Diastat. This segment is expected to contribute
less than 20% of the total revenue and Wellbutrin is expected to
chip in lesser than 4% of that total. The company is expected to
generate $350-$375 million in revenue from Canada, up 40-50% over
2011 and $200-$250 million in Australia/New Zealand, an estimated
150% growth over 2011 levels. The emerging markets, the company's
new focus area, are expected to record revenues greater than $1
billion in 2012.
Our Recommendation
We currently have a Neutral long-term recommendation on Valeant
Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the
short run.
Valeant Pharma, as it stands today, was formed following the
merger of Biovail and Valeant in September 2010. We believe
the combined Biovail/Valeant entity is a unique company with a
global reach (including exposure to important emerging markets), a
diversified revenue base, a favorable tax structure and limited
patent exposure. Moreover, accretive acquisitions add to the
company's investment thesis.
GLAXOSMITHKLINE (
GSK
): Free Stock Analysis Report
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
SANOFI-AVENTIS (
SNY
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research