The Major Factors Behind Valeant's Double

Valeant Pharmaceuticals International, Inc. has performed well of late, but can it continue to do so?

Feb 14, 2014 at 2:30PM

Shares in Valeant Pharmaceuticals (NYSE:VRX) have had an awesome year. The share price has more than doubled over the last 12 months, while the S&P 500 has posted gains of around 20% over the same time period.

Acquisition spree
A big factor in the price movement is the company's acquisitive nature. 2014 has been a very active year for the company thus far, considering that it has already announced the second of two acquisitions. Having purchased Solta Medical for a total consideration of $250 million in January, Valeant has now decided to acquire PreCision Dermatology for $475 million, as it seeks to expand its skin care business.

The deal seems to make sense for Valeant, with PreCision Dermatology manufacturing treatments for various skin ailments, including acne and atopic dermatitis, which is a chronic skin inflammation.

Although PreCision is set to generate a relatively small amount of revenue in 2014 compared to Valeant's total top line ($130 million versus $5.7 billion), Valeant has stated that the acquisition will enhance earnings from its completion, which is expected to take place over the summer. The deal seems to make sense for Valeant, with PreCision Dermatology manufacturing treatments for various skin ailments, including acne and atopic dermatitis, which is a chronic skin inflammation. It would appear to complement Valeant's dermatology offering and, therefore, seems to be a logical bolt-on acquisition.

Meanwhile, the acquisition of Solta adds brands such as Thermage and Liposonix to Valeant's stable, with Thermage being a unique radiofrequency treatment that renews the collagen in loose skin and Liposonix being a fat reduction treatment.

Further deals
Of course, the two acquisitions made by Valeant are not the only pieces of mergers and acquisition activity that have taken place in the pharmaceutical space in recent weeks.

Indeed behemoth Johnson & Johnson (NYSE:JNJ), recently announced the sale of its blood testing unit to Carlyle Group, a private equity firm, for a little more than $4 billion. The sale forms part of a wider strategy to divest what Johnson & Johnson views as slower growth assets, as it seeks to revitalize sales figures that have not kept pace with many of its rivals in recent years.

In addition, Forest Laboratories (NYSE:FRX) announced just last week the purchase of Aptalis, a company that makes treatments for cystic fibrosis and gastrointestinal problems, for a total consideration of $2.9 billion. The deal looks set to boost Forest Laboratories' revenue by up to $700 million next year and forms part of a strategy by new CEO Brenton Saunders to cut costs, restructure the business, and add to the range of treatments it offers.

Another reason to cheer
As mentioned, shares in Valeant have performed extremely well over the last year, and part of the reason for that has been encouraging news flow. The latest upbeat release from the company concerned the receipt of regulatory approval from the FDA for a supplemental new drug application for Retin-A Micro (tretinoin) Gel microsphere 0.08% for the topical treatment of acne. Valeant stated that it will launch the product in the near future.

Indeed, with shares having doubled over the last year, the next key release from Valeant could be its fourth quarter results, which are due to be released on February 27. Certainly, 2014 could prove to be another interesting year for investors in the stock and, with logical bolt-on acquisitions and encouraging news flow, Valeant could be a great investment for 2014 and beyond.

The Motley Fool's top stock for 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Peter Stephens has no position in any stocks mentioned. The Motley Fool recommends Valeant Pharmaceuticals. It recommends and owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information