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Healthcare

Valeant Pharmaceuticals International, Inc.: Our Bearish Stance Proving its Worth

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We still wait for any positive developments before we may decide on a bullish stance on the $9 billion company

TheCountryCaller has held bearish views on Canadian drug maker Valeant Pharmaceuticals Intl Inc’s (NYSE:VRX) stock for a while now. As we looked at the big picture and did not focus on the little positive developments, there was a wave of uncertainty that existed. Hence, we were not convinced to suggest a buy call at that time. Now that the bubble has burst, it becomes a lot more visible that the company was over rated on the future potential, while the present did not seem to be too enticing either.

Our article dated August 31, we discussed all the dangers that surrounded the company at that type, which is why we termed it as “shadows stronger than light”. The case of Valeant needs to be comprehensively reviewed, rather than just looking at new leadership of Joseph Papa and his diversification plans. Although both of these are positive points, the fact remains that the company is facing some litigation challenges that amount to more than $70 billion, seven times more than its market value.

While that may be a bigger challenge in the lot, the management seems to be confident that it will be able to deal with all these challenges effectively. However, it is important to deal with these challenges before we start considering it for our bullish books. It won’t be wrong to say that the street’s expectations were defied in a big way. Even when the stock prices were above $30, we used to discuss the consensus PT, which then stood above the $50 mark.

Now that the prices have plummeted more than 10% from those levels, only a few brokerages such as Duetsche Bank and Piper Jaffray have realized that the company has no fruit until it deals with all its challenges. Nonetheless, we still wait for any positive developments before we may decide a bullish stance on the $9 billion company.

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