Tags: Valeant | Shares | Drugmaker | Cash | Pile | Forecast

Valeant Shares Surge as Drugmaker Boosts Cash Pile, Forecast

Image: Valeant Shares Surge as Drugmaker Boosts Cash Pile, Forecast
(Ryan Remiorz/AP)

Tuesday, 09 May 2017 10:39 AM

Valeant Pharmaceuticals International Inc. said it’s making progress selling assets and is bringing in more cash, helping chip away at its debt and allowing it to boost its full-year forecast.

The forecast increase is a welcome sign for investors amid declining sales, legal troubles and a still-high debt burden. The drugmaker’s stock gained as much as 19 percent Tuesday -- the biggest intraday gain since November -- and was up 12 percent to $10.91 at 10:15 a.m. in New York. The shares are still down more than 90 percent since an August 2015 peak.

Valeant said that adjusted Ebitda this year will be $3.6 billion to $3.75 billion, an increase from the $3.55 billion to $3.7 billion the company projected in February. The new projection includes the one-time sale of several businesses, and excludes the pending divestiture of prostate cancer unit Dendreon, Valeant said in a statement. Some analysts had expected a cut to guidance.

Chief Executive Officer Joe Papa has promised to get the company back on stable footing after two tumultuous years. Much of Papa’s focus is on boosting cash flows and paying down some of the $30 billion in debt Valeant took on amid an acquisition spree that made the company into what it is today. It’s biggest repayment deadline comes in 2020, when $5.81 billion in maturities come due, with another $10.51 billion in the two years after.

“I’ve heard chatter in the markets that Valeant doesn’t have the ability to repay all of its debt,” Chief Financial Officer Paul Herendeen said on a call discussing first-quarter results. “Let me respond. We can meet all of our financial obligations to a combination of cash generation from our business, asset sales and importantly refinancings.”

Debt Goals

The goal isn’t to get Valeant debt-free, but to “maintain a credit profile that will enable us to access the capital markets when necessary,” Herendeen said. “If we take care of our debt, and we will, our equity will take care of itself.”

Valeant said it had $1.21 billion in cash at the end of the first quarter, more than double what it had at the end of the year. It now has $28.9 billion in debt, down from $30.2 billion in the fourth quarter.

Valeant’s most-actively traded bond, $3.25 billion of 6.125 percent coupon debt due in 2025 gained 2.25 cents to 78.25 cents on the dollar at 8:42 a.m in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. That’s its biggest gain since November. 

At the same time, Valeant’s drug business continues to deteriorate, and the company’s total first-quarter revenue was $2.11 billion, down 11 percent from a year earlier. The decline was due to a lower volume of sales from its U.S. diversified products and branded drug divisions, as well as the loss of patents for some of its drugs, the company said.

Valeant has faced pushback from the health insurers and pharmacy benefit managers that control prescription drug payments for many patients, and Valeant’s brand drug division sales were down 10 percent.

Its biggest unit, Bausch + Lomb eye care and international, was essentially flat, with $1.15 billion in sales.

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Debt declines to $28.9 billion as company sells off assets; Sales in drug units still under pressu as prices, volumes fall
Valeant, Shares, Drugmaker, Cash, Pile, Forecast
Tuesday, 09 May 2017 10:39 AM
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