Lucemyra: An Underappreciated Opportunity For Valeant

Jose Solorio profile picture
Jose Solorio


  • Lucemyra is the first and only non-opioid medication for the mitigation of withdrawal symptoms to facilitate abrupt discontinuation of opioids in adults.
  • On average more than 115 people die each day after overdosing on opioid-based products.
  • Up to 60% of people who are prescribed opioids have trouble withdrawing from their medication.
  • Approximately 90 million Americans took some form of opioid medication in 2017. The market potential of Lucemyra can't be underestimated.
  • Investors seem to have overlooked the press release without understanding the significance of the event for Valeant.

On June 26, 2018 Valeant (VRX) announced that it had entered into an exclusive agreement to co-promote US Worldmeds' Lucemyra (lofexidine). The first of its kind treatment to help mitigate the symptoms of opioid withdrawal. Shares failed to rally in light of the announcement.

I strongly believe that the market isn't giving enough credit to significant events pointing to a very significant turnaround at Valeant. Lucemyra, for example, has a potential market of 90 million Americans - yet the shares barely budged. Investors should use recent weakness to buy shares of Valeant as well as to position themselves ahead of potential catalysts like the name change coming this July.

The co-promotion of Lucemyra marks yet another significant accomplishment of the reputation that Valeant has achieved and its commitment to the betterment of society through innovation and partnerships. It also underscores the significant growth and transformation that Valeant's wholly owned Salix division has achieved since Mark McKenna assumed the role of Senior Vice President and General Manager of the unit.

As just mentioned, investors should be positioning themselves on shares of Valeant ahead of what will likely be a very strong second half of the year. As I predicted before - shares will likely rally into the $30 target this year. The focus of this article will be on the market potential of Lucemyra - if you want a broader investment thesis behind my price target at Valeant please visit my last article.

The opioid epidemic

In 2016, there were more than 63,600 overdose deaths in the United States of which 42,249 or 66.4% were related to opioid abuse. That's an average of 115 opioid overdose deaths each day. A total of 236 million opioid prescriptions were dispensed in 2016. Though the number has declined since a record 282 million prescriptions in 2012 - the number continues to be extremely high.

For example, between 2007 and 2016, the most widely prescribed opioid was hydrocodone (Vicodin). In 2016, 6.2 billion hydrocodone pills were distributed nationwide. According to the International Narcotics Control Board, Americans consume about 99.7% of the world's hydrocodone consumption.

Addiction to Opioids

Opioids bind to receptors in the brain and the spinal cord, disrupting pain signals. That's why they are so actively prescribed in the world medicines. The secondary thing that opioids do is to activate the reward areas of the brain. Opioids do so by releasing the hormone dopamine. Dopamine creates a feeling of euphoria and pleasure - what more normally we will call a "high."

The problem with opioids is that they are highly addictive. It's estimated that approximately 60% of opioid users don't want to stop taking opioids for fear of withdrawal symptoms. That's a staggering 54 million Americans. Fear of withdrawal sometimes leads people to refill their medications - or even to ask their doctor for more refills.

Now fear of withdrawal doesn't always equate to an addiction. But a staggering 1 out of 5 people who had a "Fear of Withdrawal" will end up misusing opioids. For that reason, according to the Substance Abuse and Mental Health Services Administration - about 11.5 million Americans age 12 and older misused opioids in 2016.

Lucemyra: A ray of hope for opioid users

I won't bother you with trying to explain the science behind Lucemyra. (Here's a link to the FDA Lucemyra label if you want to learn more). But to illustrate a point about Lucemyra I will explain one last thing about opioids: Tolerance.

Opioid users have to increment dosages in order to have the same "effect." It's the law of diminishing returns with opioids. Until the doses become large enough that they become toxic for the body and eventually it leads to an overdose.

A key to preventing addiction is to be able to abruptly discontinue the use of opioids as soon as possible. The 60% population of people who were prescribed opioids who suffer from a fear of withdrawal are vulnerable to poor choices based on the fear of the upcoming symptoms associated with withdrawal. But every poor choice made - Whether it's refilling a medication out of fear, getting opioids from friends or even buying them on the street puts them one step closer to getting addicted.

Going by the 2016 statistics that I just mentioned -about 11.5 million Americans abusing opioids in 2016 and the 90 million people who were prescribed opioids in 2017 - We can accurately say that 1 out of 8 people who are prescribed opioids will become dependent on them or be misusing them. Lucemyra helps to mitigate the withdrawal symptoms of abrupt discontinuation of opioids. Lucemyra will help 54 million Americans make better decisions about their "Fear of Withdrawal."

Lucemyra: The first available treatment of its kind

The most pressing issue affecting America right now it's the opioid crisis. Most heroin users start off as opioid users and end up using heroin. So that brings me back to Valeant:

  1. Valeant is bringing a first in class treatment to a nationwide problem where 54 million Americans fear withdrawing their opioid usage.
  2. Valeant can help 12.2 million Americans who are already using opioids help overcome their addiction by mitigating the withdrawal symptoms.
  3. Out of dozens of pharmaceutical companies available for possible partnerships. US WorldMeds chose Valeant to co-promote the drug.

Salix: Leveraging its relationships with doctors

Salix Senior Vice President and General Manager Mark McKenna, who was hired shortly after the Salix acquisition, told NJBIZ in an interview that one of the company’s major points of growth is through the education of primary care physicians in both the state and around the country. To that extent, McKenna hired 200 sales and marketing representatives to focus on the primary care physician market. He said back then:

“We shifted our marketing mix from direct-to-consumer advertising to expanding our salesforce to work with primary care physicians”

So to summarize, when McKenna took over Salix he decided to cut back on DTC advertising and instead Salix utilized its resources to grow their primary care sales force. That has allowed Salix to grow at a double-digit rate. It's because of this primary care salesforce that they were able to ink this very lucrative partnership. So today we throw our hats to McKenna for its leadership and vision at Salix.

Summary: Doing good and making money?

As mentioned at the beginning of this article, readers should go to my previous article for a full spectrum analysis of the target price as well as the risks associated with Valeant. Today, I want to leave readers with a thought: Making money and doing good don't contradict each other. Valeant is helping bring to the market a much-needed ray of hope for a nationwide epidemic. That in and of itself is a very noble cause.

Recently there has been a lot of negativity toward pharmaceutical companies. But overall a lot of that negativity is unwarranted. Pharmaceutical companies at large allow us to live healthier by finding cures to the most pressing issues of society. Most trials fail - making the drugs who make it to the market more expensive.

Valeant with its very capable management team and the leadership of Joe Pappa have created a company that investors should be proud to own. And when you invest in a capable, transparent and hard-working management team good returns will follow as well.

The Bausch Health Companies' story is just getting started.

This article was written by

Jose Solorio profile picture
I have been on the markets since 2006. I concentrate mostly on medium-term option trades. Among my big wins were betting against the oil spike in 2008, buying Green Mountain Coffee at $17, First solar at $14, and betting against Exxon Mobile before its collapse. My biggest failures have been investing in Fremont in 2008 and Synergy Pharmaceuticals in 2018 (both companies ended bankrupt.) Diversification is your biggest key to success in the markets. Even great losses won't make you loss your capital for reinvestment.

Disclosure: I am/we are long VRX, SGYP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Consult an investment advisor before placing any trades. The risks of investing in securities include but is not limited to total loss of capital.

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