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Why Valeant Pharmaceuticals (VRX) Stock is Up Big Today

Shares of Valeant Pharmaceuticals VRX have gained nearly 19% Tuesday following news that the company signed a distribution deal with Walgreens Boots Alliance WBA . The 20-year agreement will see Valeant give Walgreens a 10% discount off its branded prescription dermatological and ophthalmological products, as well as its over-the-counter portfolio.

In another deal announced today, Walgreens will become a distributor for more than 30 of Valeant's drugs that have generic equivalents. Walgreens will then match the price of the generic drug, resulting in significant price reductions.

Valeant said that the two programs will "provide up to $600 million in annual savings to the healthcare system." While this could initially hurt Valeant's bottom line, it should inevitably rake in a lot more customers by eliminating the generic competition.

This news comes in the wake of the controversy caused by Valeant's partner pharmacy Philidor Rx Services . Philidor and Valeant got into hot water amid allegations of false accounting. As the subpoenas started piling up, Valeant's stock starting tumbling down.

The downspin was further fueled by short-seller Andrew Left of Citron Research, who suggested that Valeant was the "pharmaceutical Enron" and guilty of massive fraud. Shares of Valeant have lost more than half their value since mid-September.

The partnership with Walgreens is a sign that Valeant is moving forward and leaving its relationship with Philidor behind. By teaming up with a trusted pharmacy like Walgreens, Valeant is sure to ease the minds of its investors.

Currently, both Valeant and Walgreens Boots Alliance have a Zacks Rank #3 (Hold).

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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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