Good news from Valeant Pharmaceuticals (NYSE:BHC)?

That's what investors got the last time the drugmaker announced its quarterly results. Valeant posted a profit in the first quarter. Its balance sheet was improved. Heck, the company even raised its earnings guidance for the full year.

Valeant provides an update on its second-quarter performance on Aug. 8. Could more good news be on the way? Here are three things you'll want to watch in the company's results.

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Image source: Getty Images.

1. Loss-of-exclusivity (LOE) upside 

There was one big reason Valeant boosted its full-year earnings guidance for 2017. It wasn't because the company expected higher sales: Revenue guidance for the year didn't change. Actually, the earnings outlook improvement didn't stem from anything Valeant did on its own. Instead, the company raised its earnings guidance primarily because bad news from loss of exclusivity for some of its products won't come as soon as initially expected.

Valeant expects this LOE upside to add roughly $110 million to earnings in 2017. And it's all due to better-than-expected sales for the company's neurological and other products. Several of these drugs have already lost exclusivity, though. It's possible that things could be worse in the second quarter than the company predicted. A lot hinges on how accurate Valeant's LOE projections turn out to be.

2. Currency impact

Valeant's Bausch+Lomb/International segment generates more than half of the company's total revenue. In the first quarter, year-over-year sales growth for the business was flat. However, adjusted for a constant currency, the segment's revenue grew by 4% over the prior-year period. 

The impact of currency rates can make the difference as to whether Valeant meets, beats, or misses earnings expectations in the second quarter. My guess is that foreign exchange rates will actually help the company's performance this time around. The U.S. dollar weakened overall in the second quarter. That should be good news for Valeant.

3. Xifaxan comeback

The single most important product for Valeant right now is Xifaxan. In the first quarter, the gastrointestinal-disorder drug made $185 million -- nearly 9% of the company's total revenue. That was a weak performance for Xifaxan, caused in large part by sales team turnover as a new competitor hired Valeant's staff.

Investors might see a comeback of sorts for Xifaxan when Valeant announces its second-quarter results, though. The drugmaker worked feverishly to rebuild the sales team. Although Valeant thinks this sales force expansion will reap the most benefits in the second half of 2017, I would surprised by improvement in the second quarter. In fact, the company stated in its first-quarter update that new prescriptions had increased by 10% from January to March and that market share had grown by 200 basis points between March 2017 and early May. 

What not to expect

There are three things that you probably shouldn't expect in Valeant's second-quarter results. First, don't count on another profitable quarter. The company's first-quarter profitability stemmed from a one-time tax benefit. 

Second, don't expect cash flow in the second quarter to be as strong as it was earlier this year. Cash flow in the first quarter was higher than normal because of a $200 million payment Valeant received from its partner, Walgreens Boots Alliance

Third, don't look for Valeant's debt to have been dramatically slashed since last quarter as a result of its announced sale of iNova in June and Obagi Medical Products in July. Neither of these deals will close until later this year. Also, Valeant's closure of the sale of Dendreon did enable the company to pay down $811 million in debt recently -- but that payment occurred after the end of the second quarter and therefore won't show up in the second-quarter results.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.