Valeant Pharmaceuticals: That Was Not Bad News, Was It?

| About: Valeant Pharmaceuticals (VRX)


Valeant Pharmaceuticals announced on Friday that it received a Complete Response Letter from the FDA.

According to Valeant's press release, the FDA detected deficiencies in an inspection targeting Bausch + Lomb's manufacturing facility in Tampa, but didn't provide further details.

Issue at hand likely solvable, and way exaggerated.

Investors don't have much love for embattled drug company Valeant Pharmaceuticals International, Inc. (NYSE:VRX) these days, that much is obvious. The company's shares have crashed almost 80 percent since the beginning of the year, and Valeant has received an unreal amount of negative publicity. Just last week the drug company had to deal with a renewed short call from Citron Research, stock sales from Michael Pearson, its former Chief Executive Officer, and former big time shareholder Sequoia was selling out, too.

On the other hand, the bullish camp had its eyes firmly locked on the company's drug pipeline, which was expected to produce a couple of victories for Valeant last week as FDA approval for key drugs loomed around the corner.

On July 19, 2016, for instance, Valeant announced that it received FDA approval for RELISTOR® tablets "for the treatment of opioid-induced constipation in adults with chronic non-cancer pain." The company said that it expects to start selling the drug in the third quarter of 2016. Victory no. 1.

On the same day, Valeant Pharmaceuticals said that the FDA's Dermatologic and Ophthalmic Drugs Advisory Committee ruled in a 18:0 vote in favor of recommending approval of the company's Brodalumab drug for the treatment of psoriasis. Victory no. 2.

So far, so good.

On Friday, however, Valeant Pharmaceuticals was dealt a (very) minor setback when it said it received a Complete Response Letter from the U.S. Food and Drug Administration regarding its latanoprostene bunod ophthalmic solution, an eye drop for patients with open angle glaucoma/ocular hypertension. According to Valeant's press statement, a FDA inspection revealed some deficiencies at Bausch + Lomb's manufacturing facility in Tampa, but the company didn't provide further details.

Valeant noted, however, that there were "no safety or efficacy concerns or additional clinical trials identified for approval of latanoprostene bunod", which makes the Complete Response Letter a bigger issue than it really is. The identified deficiencies (though not named) regarding Bausch and Lomb's manufacturing facility are likely fairly easily solvable, and may refer to manufacturing best practices that can be fixed fast. The fact that Valeant specifically said that the FDA did not have any safety of efficacy concerns makes the Complete Response Letter nothing more but a distraction IMO.

Your Takeaway

Valeant Pharmaceutical's shares cratered ~7 percent on Friday in an emotional hiccough on the back of the overly negatively interpreted FDA Complete Response Letter, which, I think, is nothing more but a distraction at this point, and a fairly easily solvable problem for Valeant.

I do not have a position in Valeant Pharmaceuticals at the time of writing, but I am strongly leaning toward gobbling up a couple of shares of this embattled drug company next week since there is just too much negativity attached to the Valeant name. Investors have been burned badly here over the last year or so, I understand, but buying at ~3x next year's earnings does look appealing. It is my guess that nobody will be even talking about this in a month or two. Speculative Buy.

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