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Valeant Beats Earnings, Misses Revs - Analyst Blog

Posted: 5/3/2013 1:31:00 PM
Referenced Stocks: MYL;ONXX;UCBJF;VRX

Valeant Pharmaceuticals' ( VRX ) first quarter 2013 earnings of $1.27 (excluding special items but including stock-based compensation expense) were short of the Zacks Consensus Estimate by a penny but were up from the year-ago earnings of 1.08 per share.

Revenues for the quarter were $1.07 billion, up 25% from the year-ago period. The year-over-year improvement in revenues was primarily attributable to higher product sales. However, revenues missed the Zacks Consensus Estimate of $1.08 billion.

Quarterly Highlights

Product sales at Valeant Pharma amounted to $1.04 billion during the first quarter of 2013, up 38% year over year. Strong sales in the US Promoted (previously US Dermatology) and Emerging Markets segments contributed to the increase.

US Promoted product sales increased 91% to $479 million fueled by solid growth in key brands such as Acanya, CeraVe, Arestin, Dysport, Restylane, Perlane and AcneFree. Organic growth (same-store sales) was approximately 6%. Product sales from the emerging markets grew 27% year over year.

On a pro forma basis (excluding the impact of foreign exchange), total revenues grew 25% from the year-ago quarter.

Research & development (R&D) expenses climbed 8.1% to $23.8 million.

Selling, general & administrative (SG&A) expenses for the first quarter of 2013 increased 36.4% to $241.9 million due to the integration of Medicis operations.

We note that in Dec 2012, Valeant Pharma acquired the entire outstanding common stock of erstwhile Medicis Pharmaceutical Corporation for approximately $2.6 billion.

Guidance Updated

Valeant Pharma updated its guidance for 2013. Valeant Pharma continues to expect revenues between $4.4 billion and $4.8 billion in 2013, up 30% from 2012, excluding potential acquisitions apart from the Natur Produkt acquisition (which was completed in Feb 2013).

Nevertheless, earnings per share on a cash basis are now projected around $5.55 -$ 5.85, up from the earlier projection of $5.45 - $5.75. The guidance includes a loss of 35 to 40 cents from the launch of Mylan's ( MYL ) generic version of Valeant Pharma's Zovirax ointment in Apr 2013.

The Zacks Consensus Estimate for 2013 hints at earnings of $5.60 per share on revenues of $4.55 billion.

Valeant Pharma expects to obtain synergies of more than $300 million by the end of 2013 from the Medicis acquisition, up from the previous estimate of $275 million. Valeant Pharma recently completed the acquisition of Obagi Medical which is expected to generate synergies of $50 million by the end of 2013.

Valeant Pharma currently carries a Zacks Rank #3 (Hold). Right now, UCB SA ( UCBJF ) and Onyx Pharmaceuticals, Inc. ( ONXX ) look better positioned with a Zacks Rank #1 (Strong Buy).

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