Valeant Shares Dip 5% Despite Q4 EPS Beat

Shares of Valeant Pharmaceuticals Intl Inc VRX fell more than 5 percent in the pre-market hours as investors ignored the quarterly EPS beat and are focusing more on the sales declines and EBITDA forecast.

• Valeant Reports Q4 Adj. EPS $1.26 vs. $1.21 Est., Sales $2.4B vs. $2.34B Est.
• Valeant Reports Q4 GAAP EPS $(1.47) Vs. $(1.12) Last Year
• Valeant Sees FY17 Sales $8.9-$9.1B vs. $8.97B, Adj. EBITDA $3.55-$3.70B

Specifically, investors were hooked on to the company’s EBITDA guidance for 2017 as it underscores the company’s ability to pay its covenants. Valeant indicated it has identified non-core assets worth $8 billion that it could potentially divest to reduce its debt load.

“Assuming all proceeds were used to pay down senior debt, we are looking for 2017 adjusted EBITDA guidance above $3.6 billion to make us comfortable with Valeant’s covenants,” Canaccord Genuity’s Neil Maruoka wrote in a recent note.

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Meanwhile, total revenues in the fourth quarter fell 13 percent to $2.4 billion, driven by reduction in product sales from the existing business, forex, divestitures and lower realized pricing.

Among the segments, the revenue of Bausch + Lomb/International unit slipped 1 percent to $1.176 billion as increased volumes in U.S. Consumer and China were partially offset by declines in Europe.

Sales at the Branded Rx segment fell 17 percent to $829 million due to declines from Salix and Dermatology business. Sales at the U.S. Diversified Products segment too dropped 30 percent to $398 million, hurt by lower volumes in Neurology.

That said, the company managed to beat adjusted EPS estimate of the Street due to cost controls. Adjusted COGS (non-GAAP) for the fourth quarter was $666 million versus $672 million a year-ago. Adjusted SG&A expenses came in at $658 million as compared to $682 million in the fourth quarter of 2015.

Valeant, burdened by heavy debt load of $28 billion, agreed to divest a number of assets, including several skincare brands, Dendreon business and smaller international interests. The company also announced the completion of the remediation at the Bausch + Lomb manufacturing site in Tampa.

Meanwhile, the U.S. Food and Drug Administration (FDA) approved Valeant’s new psoriasis treatment, SILIQ, and the company resubmitted its glaucoma treatment, latanoprostene bunod, in February 2017.

“Now, more than ever, we believe that with the right people, products and processes in place, we are well poised for a turnaround in 2017; we have a lot to look forward to and are excited about the future," CEO Joseph Papa said in a press release.

Shares of Valeant closed Monday at $16.71. In the pre-market hours, the stock is down 5.92 percent to $15.72.