Valeant Closes Senior Note Offering, Reprices Term Loan

Valeant Pharmaceuticals International, Inc. VRX closed its previously announced offering of $750,000,000 aggregate principal amount of 5.500% senior secured notes due 2025.

We note that these notes are additional notes and form part of the same series as Valeant's existing 5.500% senior secured notes due 2025.

The company used the net proceeds from the offering of along with cash in hand, to prepay (on a pro-rata basis) a portion of its outstanding loans due 2022.

In addition, the company also completed the repricing of Tranche B Term Loans to reduce the annual interest rate by 1.25%.

The company’s efforts to sell non-core assets and clear debt is commendable and should bode well in the upcoming quarters.

Valeant sold its equity interests in Dendreon Pharmaceuticals, Inc. to the China-based Sanpower Group Co. Ltd. Valeant has also announced plans to divest Obagi. The company also sold iNova Pharmaceuticals for $930 million.

The company is also divesting Sprout Pharmaceuticals and ADDYI businesses. As of Nov 7, 2017, the company lowered debt by approximately $6 billion since the end of first-quarter 2016. The divestiture of non-core assets should help the company streamline its product portfolio and focus better on core areas of dermatology and clear debt as well.

 

 

Valeant’s stock has rallied 20.1% in the last six months as against the industry’s decline of 2.9%.

Although third-quarter 2017 results were encouraging, the company trimmed its guidance due to recent divestitures. After a tumultuous period, Valeant started a rebuilding process with its CEO, Joseph C. Papa. We expect the restructuring of debt to ease long-term pressure on the company’s margins.

Zacks Rank & Key Picks

Valeant currently carries a Zacks Rank #3 (Hold).

Some better-ranked health care stocks in the same space are Sucampo Pharmaceuticals, Inc. SCMP, Ligand Pharmaceuticals Incorporated LGND and Corcept Therapeutics Incorporated CORT.  While Sucampo sports a Zacks Rank#1 (Strong Buy), Ligand and Corcept carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sucampo’s earnings per share estimates have moved up from $1.01 to $1.12 for 2017 and from $1.06 to $1.19 for 2018 over the last 60 days. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 15.63%.

Ligand’s earnings per share estimates have moved up from $3.68 to $3.70 for 2018 over the last 60 days. The company reported positive earnings surprises in two of the trailing four quarters, with an average beat of 8.22%.

Corcept’s earnings per share estimates have moved up from 45 cents to 47 cents for 2017 and from 77 cents to 80 cents for 2018 over the last 60 days. The company delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 14.32%.

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