Market Overview

Valeant's Post-Ackman Recovery Is Characterized By 'Less Money, More Problems'

Valeant's Post-Ackman Recovery Is Characterized By 'Less Money, More Problems'

Billionaire investor Bill Ackman cut his losses in Valeant Pharmaceuticals Intl Inc (NYSE: VRX)'s stock so now is the time for both the company and hedge fund manager to move on.

According to a Bloomberg report, Valeant's path forward is difficult and characterized by the company having less money than it did in the past but with more problems. Meanwhile, Ackman's exit from the stock doesn't change the fact that the company's business model is broken so, naturally, analysts are expecting at best a slow recovery.

Adding to Valeant's difficulties is the fact that it could face rising legal costs as the company has come under scrutiny by both state and federal authorities. The company has around $542 million in cash but hasn't set aside any money to cover upcoming legal fees and potential fines, which analysts suggested could ultimately total in the billions.

This is even more concerning when factoring in Valeant's $30 billion debt load, which forced the company to shift away from investing in growth to merely paying down its obligations.

Analysts Aren't Bullish

Bloomberg cited Irina Koffler, an analyst at Mizuho Securities, who noted there is no single catalyst that could result in a further steep decline in Valeant's stock, but there are a lot of little factors that could eat away at the already depleted stock price — which is close to trading in the single-digit range for the first time in years.

Ken Monaghan, a portfolio manager at Amundi Smith Breeden, told Bloomberg he expects Valeant to be "chopping wood on the debt for a while" and isn't expecting Valeant to show signs of growth at any point in the near term.

Finally, Prakash Gowd, an analyst at CIBC Capital Markets, expressed a neutral at best sentiment. Bloomberg quoted him as saying that while Valeant's team is "doing the right things" the company unfortunately does "not have a very attractive set of cards to play with."

Related Links:

Valeant: Traders Vs. Portfolio Managers

5 Takeaways For Valeant Investors As Ackman Exits

Posted-In: Amundi Smith BreedenBiotech News Health Care Legal Media Trading Ideas General Best of Benzinga


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