Light at the End of the Debt Tunnel for Valeant Pharmaceuticals Intl Inc (NYSE:VRX) Soon?


Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares jumped 33.74% on Tuesday then retreated 2.98% in after-hours trading to $23.15. Share prices have been trading in a 52-week range of $17.75 to $119.87. The company has a market cap of $7.14 billion at 341.19 million shares outstanding.

Valeant Pharmaceuticals Intl Inc is a pharmaceutical and medical device company that is ngaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter  products, and medical devices such as contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices. The company  operates through two segments: Developed Markets and Emerging Markets.

Its Developed Markets segment focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes while its Emerging Markets segment focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza while its OTC products include PreserVision, CeraVe, Biotrue and Boston. Other generic products include Latanoprost and Metronidazole while ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign.

But even with this extensive product portfolio, Valeant Pharmaceuticals Intl Inc has an overall debt pile of about $30 billion and roughly $12 billion in bank loans mostly due to its acquisitions. Its new CEO Joseph Papa has recently committed to selling $8 billion in non-core assets to help pay down its growing debt. To make matters more complicated, its former CEO Michael Pearson and ex-chief financial officer Howard Schiller are being investigated by US authorities for ties to specialty pharmacy Philidor that helped boost its sales.

Valeant Pharmaceuticals Intl Inc allegedly used Philidor to overcome insurer reimbursement rejections of its medications while the latter resubmitted claims to insurers until they were approved. Sources familiar with the matter said that these investigations could lead to more charges on Valeant or even a settlement, which would dwindle its cash on hand.

With that, the rumors of its potential sale of its Salix business couldn’t have come at a better time. The company is reportedly in talks with third parties to sell its Salix stomach-drug business and other assets, and among the interested parties is Japan’s Takeda Pharmaceutical Co Ltd. These deals could raise as much as $10 billion in much needed financing for the company as Salix was acquired last year for $14.5 billion. Valeant Pharmaceuticals Intl Inc recently issued a press statement to address these speculations.

In accordance with its duties to shareholders and other stakeholders, management evaluates any transaction relating to core or non-core business units in accordance with the best interest of its shareholders and stakeholders. We are currently in discussions with third parties for various divestitures including but not limited to Salix. The discussions may or may not lead to a definitive agreement. Valeant does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required,” its statement indicated.

On the stock’s daily time frame, it can be seen that the news sparked a large pop higher, possibly keeping enough bullish momentum in play for a move towards the $30 level. Volume has picked up but not so significantly yet, as traders are likely waiting for more details on the parties interested in the Salix unit and how the talks are panning out. Keep in mind that Takeda already tried to buy Salix as part of a joint bid with private equity firm TPG earlier this year but Valeant Pharmaceuticals Intl Inc board rejected the offer in the middle of its transition to a new CEO.

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