When Valeant Pharmaceuticals (VRX 3.85%) reported its fourth-quarter and full-year 2016 results in February, there wasn't much good news to be found. Sales fell in every business segment, and earnings plunged.
The scenario was better than it's been in a while when the drugmaker announced its first-quarter 2017 results before the market opened on Tuesday. Valeant still had plenty of negatives, but there was some good news. Here are the highlights.
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Valeant results: The raw numbers
| Metric |
Q1 2017 |
Q1 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue | $2.1 billion | $2.3 billion |
(8.7%) |
|
Net income from continuing operations | $628 million | ($374 million) |
N/A |
|
Earnings per diluted share | $1.79 | ($1.08) |
N/A |
Data source: Valeant Pharmaceuticals.
What happened with Valeant this quarter?
Revenue continued to fall in the first quarter. However, this time around, sales didn't drop across the board. The Bausch + Lomb/international business segment reported a slight increase in first-quarter sales, up $4 million from the prior-year period to $1.15 billion. The results would have looked even better on a constant currency basis.
The drugmaker still faced serious headwinds in its other segments, though. Branded Rx segment sales slipped 9.2% year over year to $604 million. Valeant attributed the decline to decreased volumes in its dermatology and Salix business units due to the loss of exclusivity of some products, continued generic competition, and the impact of more patients using high-deductible medical plans.
Sales for Valeant's U.S. diversified products segment continued to plummet in the first quarter. Revenue for the segment dropped 37% year over year to $561 million. Loss of exclusivity for several products resulted in lower volume and lower average realized price.
Valeant returned to profitability in the first quarter after reporting losses throughout 2016. However, the company's positive net income resulted primarily from a one-time income tax benefit of $908 million from a non-cash internal restructuring that occurred in the first quarter. Valeant would have had another loss where it not for this tax benefit. However, the first-quarter loss excluding the one-time tax benefit would have been narrower than the company's loss in the prior-year period, which reflects improvement.
The drugmaker's balance sheet also improved in the first quarter. Valeant reduced its outstanding debt by $1.3 billion during the quarter. The company also completed a debt refinancing transaction that extended its debt maturity profile, upped its fixed vs. floating rate debt, and increased flexibility under existing debt covenants.
What management had to say
Valeant Chairman and CEO Joseph Papa pointed to the company's first-quarter performance as an example of delivering on its overall goals. Papa said, "Our first quarter performance demonstrates that we are delivering on our commitments. We met our internal expectations, and we are continuing to make progress on our key initiatives, focus on the turnaround of our core businesses and improve internal operating efficiencies. Our divestiture efforts and cash flow generation have led to a $3.6 billion reduction in total debt to date, since the end of the first quarter of 2016, and our successful debt refinancing provides us with a more comfortable maturity profile."
Looking forward
The best news of all for Valeant was that the company raised its full-year 2017 guidance. Valeant now expects full-year adjusted EBITDA betwen $3.6 billion and $3.75 billion. Previously, the drugmaker projected 2017 adjusted EBITDA in the range of $3.55 billion to $3.7 billion.
While the improved outlook for 2017 is good, it's important to understand the challenges that the company continues to face. Valeant won't enjoy a nice bump from a tax benefit next quarter. However, the company will still have to deal with the ongoing negative impact of the loss of exclusivity for several drugs.
Even Valeant's wins come with difficulties. The company won U.S. regulatory approval for psoriasis drug Siliq in February. However, Valeant's strategy of pricing the drug lower than the competition won't guarantee success due to Siliq's boxed warning related to suicidal ideation and Risk Evaluation and Mitigation Strategy (REMS) program that restricts access.
Still, Joe Papa will take any good news he can get. He finally had some to report this quarter.
