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How Valeant is changing the Pharmaceutical Industry?

Valeant Pharmaceuticals International, Inc.VRX is a specialty pharmaceutical company well-known for its branded, generic and branded generic drugs, over-the-counter products, and medical devices.

Currently, Valeant is focused on acquiring companies that possess a promising portfolio or may provide a pass for entry into a lucrative market, rather than working on its own research and development activities. Over the past few years, the company has completed several transactions with the aim of boosting its portfolio as well as its geographic footprint. In Apr 2015, the company acquired Salix Pharmaceuticals and added several innovative gastroenterology treatments, including Xifaxan 550 mg, Ruconest, Apriso, Uceris extended release and Relistor, to its portfolio. Moreover, in Aug 2015, Valeant announced its intention to acquire Sprout Pharmaceuticals. Sprout's Addyi (flibanserin) was approved by the FDA in the same month for the treatment of acquired, generalized hypoactive sexual desire disorder in pre-menopausal women.

Valeant under Scrutiny

Recently, Valeant was involved in controversies in relation to its practice of "price gouging". Following Democratic Presidential candidate Hillary Clinton's comment on the rising prices of specialty drugs, which led to a massive price slide in the entire biotech sector, Valeant saw a steep decline in share prices in September.

Hiking the prices of two drugs by Valeant had sparked the controversy. Notably, the company had raised the price of Nitropress (congestive heart failure and hypertensive episodes) by 212% (to $805.61) and Isuprel (heart block and abnormal heart rhythm) by 525% (to $1,346.62), after acquiring them from Marathon Pharmaceuticals earlier this year. On Oct 14, 2015, Valeant announced that it has received subpoenas from the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York regarding its pricing, drug distribution and patient assistance programs.

We remind investors that Valeant is not the only company to be following this business strategy. In Aug 2015, Turing Pharmaceuticals, headed by ex-hedge fund manager, Martin Shkreli, acquired U.S. rights to Daraprim (approved for various indications including toxoplasmosis, acute malaria and chemoprophylaxis of malaria due to susceptible strains of plasmodia) from Impax Laboratories IPXL and increased its price from $13.50 to $750 per pill in a single shot.

Given the ongoing pricing dynamics and political pressure, it is early to say if Valeant's strategic plan will affect the general behavior of companies operating in the pharmaceutical sector. As of now, investor focus remains on Valeant's efforts to counter negative investor sentiment regarding drug price increases.

Valeant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Lannett Company, Inc. LCI and Endo International plc ENDP . Both carry a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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