Valeant posts 36% growth amid pricing scrutiny; may sell neurology biz

Valeant CEO J. Michael Pearson

Valeant ($VRX) may be the subject of current government scrutiny, and it may have recently suffered a stock-price freefall. But the company gave investors some good news Monday with earnings that beat their mark.

The Canadian drugmaker recorded third-quarter EPS of $2.74, excluding one-time items--topping consensus estimates of $2.70. Revenue also ticked upward by 36% year-over-year, hitting $2.79 billion, partly thanks to recent acquisition Salix, which delivered $461 million--almost 50% more than the $300 million Valeant had forecast.

And another high point for the Quebec-based pharma: The growth was more volume than price, if by a small margin. Evercore ISI analyst Umer Raffat noted that in the U.S., 19% of Valeant's branded prescription product growth was driven by volume increases, compared with 15% from price increases.

Those price increases have put Valeant in the hot seat recently, with lawmakers demanding information on the company's strategy, particularly on a couple of large--and highly publicized--increases. Last week, Valeant revealed that it had received subpoenas from the U.S. Attorney's Office for the District of Massachusetts and from the U.S. Attorney's Office for the Southern District of New York, requesting materials largely related to its pricing decisions. 

CEO J. Michael Pearson has maintained that hiking prices--which Valeant has done 56 times this year alone--isn't a key facet of the company's broader strategy. As he outlined Monday on a conference call, the company has other moves up its sleeve to keep business booming.

For one, it may hive off its neurology and "other" drugs business, he told investors, a non-core unit that would make up about 10% of future sales.

"Given the current environment, I think that it probably doesn't make sense for us to hold on to it," he said, as quoted by Bloomberg. "Hopefully we'll figure out a way to do it in a way that shareholders can continue to participate in an entity that's maybe not a growth company, but a big dividend company."

Valeant also plans to sock more money into R&D, an area where it's traditionally been averse to spending. Instead, it's thrown its weight behind acquisitions--and it'll continue to do so, though with different criteria.

"It's likely we'll pursue fewer if any transactions that are focused on mispriced products," Pearson said on the call.

Instead, the company will be seeking "durable" assets that would fit with its Bausch + Lomb eyecare business, which it picked up back in 2013, Reuters reports.

In the meantime, Valeant expects sales to keep expanding. It raised its Q4 forecast slightly, to a range of $3.25 billion to $3.45 billion, up from $3.2 billion to $3.4 billion. On the adjusted EPS side, the company now predicts it'll land between $4 to $4.20, boundaries it ticked upward from an earlier $3.98 to $4.18 forecast.

- read Valeant's release
- get more from Bloomberg
- see Reuters' take

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