Earnings season remains in full swing, and tomorrow morning, one of the most popular and embattled drugmakers in the entire market is set to reports its second-quarter results.

Valeant Pharmaceuticals (NYSE:BHC) is slated to release its quarterly performance before the opening bell on Tuesday, August 8. According to estimates from Wall Street, the company is expected to report in the neighborhood of $2.2 billion in sales, which could represent a high single-digit percentage drop in year-over-year sales, along with a profit per share of $0.94. This compares with the $1.40 per share profit the company delivered in Q2 2016. Though past performance is no guarantee of future results, the company has come up short of Wall Street's consensus earnings per share (EPS) figure in five of the past six quarters.

An investor clicking on the "quarterly report" tab on a digital screen.

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What Wall Street is likely focusing on

As you might have rightly guessed, Wall Street and investors will be intricately focused on Valeant's EPS for the second quarter, as well as the company's progress in reducing its debt.

For those who many not recall, at one time, Valeant was sporting more than $32 billion in debt. The company had made its living by acquiring assets (and other companies in some instances) and lifting drug prices to boost its sales and profits. Valeant often used debt as a means to finance these deals. However, because of a significant reduction in pricing power, legal issues with a former drug distributor, and weaker sales of its products, the company has instead turned its attention to selling non-core assets and lowering its outstanding debt. Current CEO Joe Papa has pledged to knock $5 billion off of Valeant's debt pile by Feb. 2018.

For what it's worth, Valeant does seem to be well on its way to achieving that goal. Through the first quarter, the company had reduced its cumulative debt by $3.6 billion, and this wasn't counting the now-closed Dendreon sale for $819.9 million. Since the end of the first quarter, Valeant also jettisoned iNova Pharmaceuticals for $930 million and Obagi Medical Products for $190 million. Assuming the company uses the bulk of its sale proceeds to reduce debt, it should easily surpass $5 billion in debt reduction by perhaps the end of the third quarter.

An investor pondering what could happen when Valeant reports on Tuesday morning.

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Here are two figures you should be paying far more attention to

Wall Street and investors will be keenly focused on Valeant's debt reduction and EPS -- but they really shouldn't be. There are two far, far more important figures in the company's upcoming second-quarter report that'll have more bearing and give you a much better idea of Valeant's underlying health.

1. Core-brand sales growth/decline

Instead of focusing on Valeant's EPS figure, which could contain a number of non-GAAP adjustments, pay really close attention to how the company's two core brands performed: Bausch & Lomb, and collectively its Branded Rx segment, which includes Salix Pharmaceuticals.

CEO Papa has suggested that these two core brands could go on the market, if necessary, to reduce the company's debt, but that the price for these key puzzle pieces would have to be right. A purported $10 billion deal for Salix with Takeda Pharmaceutical, which would have represented about a $1 billion reduction in price compared to what Valeant paid, fell apart in Nov. 2016, with no interest in Bausch & Lomb or Salix since. Essentially, Valeant is counting on these core brands to turn its business around, but both have languished.

For what it's worth, Bausch & Lomb turned in constant currency growth in the first quarter of 4%, which is a tad bit below the projected growth from management of 5% to 7% for the full year. However, it was a marked improvement over the 1% sales decline reported in the sequential fourth quarter of 2016. Shareholders will likely be looking for 4% or higher growth in Bausch & Lomb in the second quarter.

Prescription drug capsules lying atop a pile of cash.

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The bigger concern has been Branded Rx, where Salix's therapies have been a disappointment. Sales of Branded Rx plunged 9% year over year in the first quarter, and a whopping 17% in the sequential fourth quarter. Management expects Branded Rx sales to grow by 2% to 5% in 2017, but that looks to be a tough task at present. Shareholders should be looking for a low-single-digit decline (basically anything better than a 9% year-over-year drop) as a sign of success.

You'll see in the next key figure why core sales growth/declines will have such importance in the company's second-quarter report.

2. EBIDTA-to-interest coverage ratio

The second key figure to eye in Valeant's report is a ratio you'll have to calculate yourself. I know...math. But I promise it'll be exceptionally easy to figure out.

While Wall Street will be focusing on the company's debt reduction, you should take note of its ratio of EBITDA (earnings before interest, taxes, depreciation, and amortization) to interest coverage. Interest coverage is a fancy way of saying how much the company pays to service its debt by paying interest and fees. All you'll need to figure out this ratio is take the company's EBITDA, which it'll plainly list in its quarterly report, and divide it into its interest expenses, which will also be plainly listed in the financials section of the report.

Why this ratio? EBITDA to interest coverage is the ratio that dictates whether or not Valeant is in violation of its debt covenant with its secured lenders. The company's lenders want assurances that their loans are safe, so they require Valeant to make "X" times more EBITDA than debt-servicing costs each year. Currently, the threshold to violate the debt covenant is just 1.5-to-1, which is exceptionally low. In fact, Valeant has renegotiated its debt terms, including its maturity dates and debt covenant levels, on multiple occasions. Unfortunately, doing so means accepting a higher interest rate and fees in the process. Thus, even though Valeant's debt pile was reduced by $3.6 billion since Papa took office, its EBITDA-to-interest coverage ratio has continued to fall as a result of higher interest expenses. Arguably, Valeant is in worse shape now than a year ago, and if it violates its debt covenants, it could be forced to quickly repay its debts.

A stack of hundred dollar bills under lock and key, symbolizing a lot of debt.

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You're going to want to pay very close attention to the company's second-quarter report to see if this ratio improved or declined from the 1.83-to-1 that was recorded in the first quarter. Yet another decline would be disastrous and would put Valeant on a potentially unsustainable path.

Now, back to the first figure, core-brand sales growth. The only way this ratio is going to genuinely improve, short of Valeant being able to sell its non-core assets for a premium, which has happened in only rare instances so far, is for its core brands to show signs of life. If Branded Rx sales are still falling, and Bausch & Lomb sales don't accelerate from their Q1 total, we're probably not going to see any improvement in the EBITDA-to-interest coverage ratio.

Now that you know what to watch, make sure you set your alarm, because we're less than a day away from Valeant's second-quarter report.

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.