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Valeant Pharmaceuticals International, Inc. (VRX - Analyst Report) recently stated that it anticipates its 2013 guidance to decline following the approval of a generic version of its Zovirax ointment. 

Reportedly, Mylan Inc. (MYL - Analyst Report) recently received U.S Food and Drug Administration (FDA) approval to sell the first generic version of Zovirax ointment.

Mylan launched the drug after receiving final approval from the FDA regarding the Abbreviated New Drug Application (ANDA) for its generic version of the drug.

In response, Valeant will also launch an authorized generic version of Zovirax. We remind investors that Zovirax accounted for 7% of Valeant’s total revenue in 2012.  

Valeant estimates the launch of Mylan’s generic version to adversely impact its bottom line on a cash basis by 30 to 40 cents in 2013. Concurrent with the fourth quarter results in Feb 2013, Valeant reaffirmed its guidance provided in January. Earnings per share were then projected around $5.45 – $5.75. 

Valeant intends to provide an updated guidance in May along with its first quarter 2013 results. The current Zacks Consensus Estimate stands at $5.69 and we estimate downward revisions in the same going forward.

We note that Zovirax is indicated for the management of initial genital herpes and limited non-life threatening mucocutaneous herpes simplex infections in immuno-compromised patients.

Valeant has been marketing Zovirax in the US since Jan 2002 under a 20-year exclusive distribution agreement with GlaxoSmithKline (GSK - Analyst Report). This agreement was terminated in 2011. Subsequently, Valeant entered into a new agreement and acquired the marketing rights to non-ophthalmic topical formulations of Zovirax in the US and Canada from GlaxoSmithKline in the first quarter of 2011.

Valeant Pharmaceuticals currently carries a Zacks Rank #3 (Hold).  Right now, Furiex Pharmaceuticals Ltd. looks better positioned with a Zacks Rank #2 (Buy).

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