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Valeant Beats on All Fronts

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Valeant Pharmaceuticals International’s (VRX)  third quarter 2012 earnings of $1.11 per share (excluding special items but including stock-based compensation expense) was above the Zacks Consensus Estimate of $1.09 and the year-ago earnings of approximately 62 cents per share.

Revenues for the quarter were $884.1 million, up 47.2% from the year-ago period. The year-over-year improvement in revenues was primarily attributable to higher product sales. Revenues surpassed the Zacks Consensus Estimate of $873 million.

Quarterly Highlights

Product sales at Valeant Pharma amounted to $856.9 million during the third quarter of 2012, up 50%. Strong sales in the US Dermatology and the Emerging Markets segments contributed to the increase. Organically, (excluding the impact of acquisitions and foreign exchange), revenues grew 12% from the year-ago quarter.

Research & development (R&D) expenses climbed 9.7% to $19.2 million. Selling, general & administrative (SG&A) expenses for the third quarter of 2012 increased 40% to $188.7 million.

Guidance

Valeant Pharma adjusted its earnings guidance for fiscal 2012. Cash earnings are now expected in the range of $4.60–$4.65 per share (previous guidance: $4.55–$4.75 per share). Valeant continues to expect total revenue in the range of $3.4 billion – $3.6 billion. The Zacks Consensus Estimate for 2012 hints at earnings of $4.50 per share on revenues of $3.5 billion.

Cash earnings for the final quarter of 2012 are expected in the range of $1.30-$1.35 per share (previous guidance: $1.25–$1.45 per share). The guidance does not include new interest expense of 12 cents per share pertaining to Valeant’s impending acquisition of Medicis Pharmaceutical Corporation . The Zacks consensus Estimate for the fourth quarter of 2012 currently stands at $1.31 per share.  

Our Recommendation

We have a Neutral recommendation on Valeant Pharma. Valeant Pharma carries a Zacks #4 Rank (Sell rating) in the short run.

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