Valeant Offers Price Cuts in Walgreens Deal

We rate VALEANT PHARMACEUTICALS INTL as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

The Quebec-based company says it will drop wholesale prices for branded prescription-based skin and eye-care products by 10 per cent.

The 20-year agreement, which will go into effect early next year, will cover a variety of dermatology and opthalmology products, including Jublia, the antifungal treatment that previously saw about 40% of its sales go through Philidor. The institutional investor previously had a 2,500 share position in the specialty pharmaceutical company, valued at approximately $232,650. (LL) spikes 27% to $17.84 in pre-market trade after short-seller Whitney Tilson announced in an article written in SeekingAlpha.com he has covered his short.

Valeant said it would end its relationship with Philidor on October 30, after reports about tactics Philidor allegedly used to gain more insurance reimbursements for Valeant medicines, including submitting claims using other pharmacies’ identification numbers and altering codes on some doctors’ prescriptions.

The drugs would be available at more than 8,000 retail pharmacy locations of Walgreens in the USA, and also at participating independent retailers.

Valeant said that the two programs will “provide up to $600 million in annual savings to the healthcare system”. Independently, Walgreens has retained Leavitt Partners, headed by former U.S. Dept. of Health and Human Services (HHS) Secretary and former Utah governor Michael Leavitt, to assess the model and evaluate its benefits to patients and markets to ensure it is delivering value. VRX has a 1-year high of $263.81 and a 1-year low of $69.33. It closed at US$94.14 in NY on Monday. The stock now has an average rating of “Buy” and an average price target of $163.62. The 50-Day Moving Average price is $91.49 and the 200 Day Moving Average price is recorded at $191.26. The 12-month average price target assigned to the stock is $156.62, which represents a potential upside of 66.4% from where the stock is now trading.

Valeant has seen its shares VRX, +16.21% hammered this year in the wake of a scandal involving its accounting methods and use of the specialty pharmacy network Philidor, as well as criticism about its strategy of acquiring drugs and then increasing their prices instead of developing them itself through laboratory research.