Warner Chilcott, Valeant Pharmaceuticals Share Several Attractive Attributes, Bank of America Reports

In addition to being large Specialty Pharma companies, Bank of America reports that “Warner Chilcott plc WCRX and Valeant Pharmaceuticals International, Inc. VRX share several attractive attributes, including high margins, strong cash flow generation, and favorable tax structures.” “While we agree that VRX deserves a premium based on its more diverse revenue base and stronger growth profile, we question the magnitude of the valuation gap between the two,” Bank of America writes. “VRX is trading at a 2012E P/E multiple of 15.9x vs. 5.9x for WCRX, and an EV/revenue multiple of 7.9x vs. 3.6x for WCRX. While we cannot point to a specific catalyst or timeline, we believe the valuation gap between the two stocks could narrow somewhat over time.” Valeant Pharmaceuticals International closed Tuesday at $53.80; Warner Chilcott closed at $23.05.