On Tuesday morning, embattled drugmaker Valeant Pharmaceuticals (BHC -2.07%) released its much-anticipated first-quarter earnings results, and its share price responded by gaining a whopping 24%. Good days aren't all too common for Valeant and its shareholders since the summer of 2015. Even with Tuesday's gain, the stock is still off more than 95% in less than two years.

What excited shareholders the most?

To begin with, Valeant ended a five-quarter streak of losses thanks to a $908 million one-time tax benefit related to a non-cash internal restructuring. This resulted in a bottom-line GAAP diluted profit of $1.79 per share, compared to a GAAP loss of $1.08 per share in the prior-year period.

Investors at an investment firm cheering on Valeant's stock gains.

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Its all-important Bausch & Lomb operating segment also demonstrated top-line improvement on a constant currency basis. Although year-over-year sales were essentially flat at $1.15 billion, without the impact of foreign currency fluctuations sales would have grown by a healthy 4%. Valeant had previously projected mid-to-high single-digit growth for Bausch & Lomb in 2017, and this is a good start.

Valeant also managed to chip away $1.3 billion in debt from its beefy debt pile. After ending 2016 with $29.85 billion in debt, the company reported $28.54 billion in debt as of the end of Q1. Its $1.1 billion sale of three medicated skincare products to L'Oreal is a big reason for the reduction in debt. Per CEO Joe Papa, the company has now reduced its debt by $3.6 billion since it reached its peak.

And finally, Valeant actually increased its full-year earnings before interest, taxes, depreciation, and amortization (EBIDTA) forecast to a range of $3.6 billion to $3.75 billion from $3.55 billion to $3.7 billion. EBITDA is of the utmost importance for Valeant since its secured lenders look to this figure to get a feel for how "safe" their loans are and if Valeant can repay its debts.

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Valeant's smoke-and-mirrors report

Yet, in spite of these highlights, and Valeant being a holding of the Motley Fool Everlasting Portfolio, this Fool wasn't the least bit impressed. In fact, this might be the best smoke-and-mirrors performance I've ever seen.

Let's take each prior highlight one-by-one and I'll show you what I'm talking about.

First, Wall Street and investors lauded Valeant's first profit in six quarters. However, this fails to take into account that this profit had nothing to do with an improvement in the company's underlying business. It was merely a one-time tax benefit. Without this benefit, Valeant would have easily been steered to its sixth straight quarterly loss.

Branded Rx sales nosedived once again

In terms of sales, Bausch & Lomb delivered better than expected constant currency growth, but everything else was more or less a train wreck.

Wall Street had been looking for something in the neighborhood of $2.2 billion in sales, and Valeant delivered a subpar $2.11 billion. U.S. diversified products, which primarily is comprised of Valeant's more mature assets, saw sales fall by a stunning 37% to $355 million. About three-quarters of the $206 million year-over-year sales drop was based on lower sales volume, but $47 million was a direct result of weaker pricing. Valeant warned investors following its Q4 report that 2017 would be challenging from a patent expiration perspective, and this certainly appears to be the case.

Continuing with sales, its branded Rx segment, which includes Salix Pharmaceuticals, a company Valeant paid $11 billion for in 2015, saw sales fall by 9% to $605 million. As a reminder, Valeant's management team called for sales growth of 2% to 5% in this segment in 2017. That's not a good start.

A magnifying glass hovering over a balance sheet, highlighting the debt column.

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Little in the way of organic debt reduction

Next in line is Valeant's debt. Yes, it did repay $1.3 billion, and that's worthy of a golf clap. But, dig a bit deeper into the report and you'll see that the adjustment it took against net income for the loss of extinguishment on debt was just $64 million. Meanwhile, interest expenses rose by $47 million. It essentially funneled its proceeds from the sale of its three medicated skincare products to L'Oreal straight to paying off debt, used a little cash on hand, and used very minimal operating cash flow to pay down its debt during the quarter. Without this sale to L'Oreal, Valeant would have made virtually no organic headway on reducing its debt.

This wouldn't be a major sticking point if Valeant were successfully divesting its non-core assets, but it isn't. It was able to make a deal with L'Oreal, and it has a deal with China's Sanpower to sell its Dendreon assets for $820 million that'll close soon. However, it's had no takers for iNova Pharmaceuticals for eight months, and a deal that could have seen Salix gobbled up by Takeda Pharmaceutical for $1 billion less than Valeant paid in 2015 fell through over price this past November. Without these asset sales, Valeant will make little to no headway on its debt based on what I'm seeing from this quarter's data.

The EBITDA hike comes with a big asterisk

Finally, even though Valeant lifted its full-year EBITDA forecast, it comes with a pretty substantial asterisk. The paragraph directly beneath the EBITDA guidance increase reads:

This guidance reflects the impact of the sale of the CeraVe, AcneFree and AMBI skincare brands. This guidance does not reflect the impact of the sale of the Dendreon business, which is expected to close mid-year.

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Dendreon's lone approved asset, Provenge, a cancer immunotherapy treatment for advanced prostate cancer, had realized annual sales in the ballpark of $300 million when it was scooped up by Valeant from bankruptcy court.  When the sale to Sanpower is complete, Valeant will see about 3% of its annual sales, and a high-margin cancer therapeutic, go away. It says right in the press release that the EBITDA outlook doesn't include the impact of its Dendreon business sale. This means we could likely see Valeant cut its EBIDTA outlook once more in the quarters to come.

What's more, the company's $861 million in EBITDA, which shrunk from $1.01 billion in Q1 2016, compares poorly to the $471 million it paid in net interest expenses during the quarter. The aforementioned EBITDA-to-interest coverage ratio fell again to 1.83-to-1. This is dangerously low. Despite reducing its debt, Valeant's struggling operations could still mean that it defaults on its debt by violating its debt covenants with its secured lenders.

If you dig past the smoke-and-mirror headlines, you're left with a pretty uninspiring report that suggests Valeant is still in very deep trouble.